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Woolworths boosts sales by 6.1% to $15.68 billion

Leading non-discretionary retailer Woolworths (ASX: WOW) has released its sales results for the first quarter of financial year 2014. The results show a 6.1% increase in sales from continuing operations to $15.68 billion; continuing operations exclude the Dick Smith consumer electronics division, which has been divested.

All divisions contributed to the growth in sales with the exception of Big W, which saw sales fall by 3.6%. The Australian Food and Liquor division, which houses the all-important Woolworths’ supermarket business, recorded 4.5% sales growth to $10.6 billion. The New Zealand Supermarket division benefited from exchange rate movements, but in New Zealand dollars growth was lacklustre. Petrol sales grew 12.6% thanks to a combination of higher prices and increased volumes, while Hotels and Home Improvement recorded 6.3% growth and 28.2% respectively as acquisitions and store roll-outs continued.

Wesfarmers (ASX: WES) which owns the Coles business and competes directly with Woolworths, as reported here recently released its first-quarter sales results as well. Of particular interest to investors is the 4.4% increase in Food and Liquor sales, which Coles reported, compared with Woolworths’ 4.5% growth in Australian Food and Liquor sales.

Perhaps most interestingly, Woolworths reported it had boosted market share considerably, stating that “an additional 1.1 million customers on average per week have chosen to shop in our stores during the quarter.” This is a phenomenal achievement. The result can partially be explained by the further expansion of the Masters Home Improvement store network, the acquisition of direct-to-consumer business EziBuy and further growth in online sales. However, market share gains have also likely come at the expense of independent operators as well as wholesaler and IGA owner Metcash (ASX: MTS).

Foolish takeaway

Woolworths’ first-quarter sales result show that despite the company’s large size it can still grow top line revenues at a reasonable rate. Having said that, the growth rate is far from ‘supercharged’, which should make investors question if there is much upside on offer if purchasing of the stock at current price levels.

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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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