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Woolworths cheers latest sales figures

Leading retailer Woolworths (ASX: WOW) has released divisional sales figures for the 53-week year ending June 30, with management also providing ‘normalised’ data that adjusts for the extra week.

The supermarket division, which comprises Australian food and liquor, New Zealand supermarkets and petrol, overall performed reasonably well. During the year the company opened 34 supermarkets in Australia and closed nine, bringing the total to 897 stores. An additional 16 Dan Murphy liquor stores were opened bring total store numbers to 175.

Australian food and liquor continued its solid performance and grew sales by 4.7%. This is no small feat for a division with around $40 billion in sales and which faced average price deflation (including promotions and volumes) of 2.9%. Importantly, on a comparable store sales basis growth was 2.7% which was an improvement on the 1.1% achieved in the 2012 year with the release noting that “during the year, the Australian food and liquor business continued to increase market share, customer numbers and basket size with strong volume growth a key highlight.”

Given anecdotal evidence of a strengthening New Zealand economy it was perhaps surprising that NZ supermarket sales only increased by 2.3% (in NZ dollars) with comparable store sales flat.

Petrol was the laggard within the supermarket division, with both sales per litre and sales in dollar value declining by 1.4% and 0.8% respectively.

The Big W division squeezed out a 2% gain in sales, which considering the difficult consumer discretionary environment was a pleasing result. Six new Big W stores were opened during the year, on a comparable store basis sales growth was a strong 4.2%.

While hotels is the smallest of the established divisions, making growth potentially easier off a smaller base, it was impressive to see management achieve 10.5% growth in comparable store sales. Overall sales growth was 19.7% with the acquisition of 32 (net) hotels accounting for around half of this growth. Total venue count at the end of the year was 326.

Given the roll-out stage for the Masters chain — store numbers increased from 15 to 31 –there was a large boost to sales from the home improvement division. Over the 52 weeks sales shot up 46.7%, but for now this sales data is of limited meaningful use to investors.

Overall the sales figures looked reasonable given the lacklustre state of the economy. The market was perhaps expecting more however, with Woolworths shares sold down 1.6% yesterday to $33.22. In comparison the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) finished the day flat.

With competitor Wesfarmers (ASX: WES) due to release its full year results including fourth-quarter retail sales figures on Thursday 15 August, investors will have to wait a couple of weeks before the all-important comparisons of relative performance between Woolworths and Coles can be drawn.

Foolish takeaway

While quarterly and annual sales figures are important and give investors a feel for the direction a business is heading in, without crucial details such as overall profitability and margins, investors should be cautious about sales figures alone. The potential for managers to push for ‘growth for growth’s sake’ without a corresponding uplift in profits makes a focus on revenue growth alone dangerous.

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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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