Supermarkets, Big W, and Masters all see growth thanks to Carbon Tax

Payments made by the federal government to offset the impact of the carbon tax have boosted sales at retail giant Woolworths, while payments to families with school-aged children have benefited the company's Big W discount department store chain.

After touring stores and distribution centres in Sydney last week, Woolworths chief executive Grant O'Brien told analysts that trading conditions had improved because of the government's household assistance package, which began making payments last month.

JPMorgan analyst Shaun Cousins said: "This has been a positive for Big W, especially the Apple iPad, and Australian food and liquor, especially tobacco and liquor."

Credit Suisse analyst Grant Saligari said the government education maintenance allowance, which no longer requires recipients to provide evidence of spending on education, had also helped to increase sales to "budget customers" at Big W in the past six weeks.

 

Big W is planning to overhaul its marketing to focus on value, with the slogan "Everyone's a winner with Australia's lowest prices" to be included in television ads from this month.

Big W multi-channel distribution manager Penny Winn said the new general merchandise distribution centre in Sydney would cut costs by slashing inventory holding times and freight costs, as stock for NSW stores had previously being shipped from Queensland or South Australia.

Masters, the Woolworths hardware joint venture with US home improvement giant Lowe's, was outperforming in the whitegoods category, which was expected to affect competitors, Mr Saligari said.
Chief financial officer Tom Pockett said an outcome was expected in the sale process for Dick Smith Electronics in the next four weeks, after divestment plans were announced in January.

However, Mr Saligari said there was a low probability Woolworths would sell the business and the company was at risk of incurring further costs from store closures and declining profits.

In the supermarkets business, Woolworths highlighted the renewed focus on fresh food, but Mr Cousins said revelations that its market share in fresh meat was poor in comparison with its share of all fresh food suggested work was needed to improve product perception.

Citi analyst Craig Woolford noted that some of this work had begun. "Butchers are accessible, the bread smells waft through the store and fruit and vegetables are cut up in front of customers," he wrote in a briefing to clients.

"The tour revealed a lot of incremental work and a reinvigorated management team looking to maintain its leadership in sales per square metre and hold profit margins. The way to view Woolworths is as a well-run business pulling all the levers required to continue growing profit."

Source: http://www.theaustralian.com.au/business/companies/federal-handouts-lift-woolworths-sales/story-fn91v9q3-1226427562736