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Supermarkets drive sales at Woolworths

Supermarket giant, Woolworths Limited (ASX: WOW) has reported a $1.15 billion profit for the six months to December 2012, a 19% rise over the previous period.

Australian Food and Liquor sales rose 4.7% to more than $20.4 billion, while New Zealand Supermarkets produced a 3.1% rise in revenues to $2.3 billion. Big W also posted strong growth, with revenues rising 3.6%. The Hotels and Home Improvement divisions recorded big jumps in revenues – up by 19.3% and 54.6% respectively.

All up, sales from continuing operations reached $30 billion, following the sale of the Dick Smith consumer electronics division last year. A fully franked dividend of 62 cents a share was declared, up 5.1% over the previous year.

The company announced that it was gaining market share, perhaps at the expense of Coles – owned by Wesfarmers Limited (ASX: WES), or IGA supermarkets, supplied by Metcash Limited (ASX: MTS).

This was a pleasing result, and Woolworths upgraded its full year growth estimates slightly from between 3-6% to 4-6%, on the back of strong results from all its sectors, despite challenging trading conditions in the Australian and New Zealand retail sectors.

Expansion into new ventures appears to be on the cards, with news out today that the company may be interested in buying into a Barossa Valley winery. That comes as the South Australian government is reportedly considering allowing limited wine sales in the state’s supermarkets.

Foolish takeaway

With plans to continue rolling out stores across all its divisions, strong cost control and ongoing improvements to its existing business, as well as potential moves into new areas, Woolworths looks well placed to generate earnings growth in the years ahead.

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