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Woolworths pins its hopes on summer sales

| Retailer trading results

Summer sales might offer a helpful fillip for clothing retailer Woolworths after a poor winter start to the first 19 weeks of this financial year.

The company saw an increase of 8.9% in group sales but a closer look at the company’s divisions showed Woolworths started the year weaker.

The company said in a trading statement on Friday that it expected an increase of 2% in general merchandise sales, but, when new stores were excluded, sales dropped by 0.8%. Furthermore, sales growth failed to match clothing and general merchandise inflation of 7%. The company reported that the space allocated to clothes and general merchandise grew by a net 2.9% during the period.

Sales for the company’s recent Australian acquisition David Jones grew by 2.2%. But the division grew by only 0.6% in Australian dollar terms when new stores are excluded and the closure of Dick Smith Electronic is taken into account. Dick Smith Electronic ran David Jones’s home entertainment department. Retail space for David Jones stores grew by a net 3.4%.

Woolworths’ high-end retailer Country Road Group performed poorly during the period, with sales falling 2.8% in Australian Dollar terms during the period.

Sales were down by 4.9% across established stores and retail space grew by a net 2%.

Woolworths said an extremely warm winter, which resulted in a high level of promotions as retailers in SA tried to clear winter stock, affected the start to the financial year in both SA and Australia.

"As summer arrives, we are seeing sales improve, albeit in challenging conditions in both markets," Woolworths said in a statement.

During the period the company also saw an increase in sales from its food division, which jumped 9.1% but this was offset by an 9.2% increase in inflation for its products. Sales in established stores grew 4.9% while retail space expanded by 8.3% during the period.

Woolworths said that its financial services debtors’ book reflected year-on-year growth of 2% at the end of October, with an annualised impairment rate for the four months to end-October at 6.4% compared with 5% for the matching period.

The group’s interim results for the 26-week period ended December 25 2016 are scheduled to be announced February 16 2017.

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