Woolworths said its annual net profit fell 15 per cent on provisions linked to its exit from the underperforming Dick Smith electronics outlet.
Woolworths, which owns Australia's largest supermarket chain, said net profit in the year to June 24 was $1.82 billion, down from the previous year's $2.12 billion.
Woolworths also owns popular liquor retail chain Dan Murphy's, discount department store Big W, some pubs, and Masters Home Improvement, a new chain being rolled out as part of a joint venture with US giant Lowe's and stores in New Zealand.
Chief Executive Grant O'Brien said a 5.6 per cent gain in earnings before interest and tax “reflects a stronger end to the year compared to the first half, and that trend of performance has continued into the start of this financial year”.
“In a market characterised by subdued consumer confidence and with highly competitive trading conditions, we increased market share, we increased customer numbers and we increased items sold,” Mr O'Brien said.
“While trading dollars continue to be impacted by significant deflation, particularly in produce, seafood, bakery and deli, our customers have been really taking advantage of those lower prices across these categories, and our volumes have continued to increase.”
The company warned in its statement that it expected the Australian and New Zealand retail sectors to continue experiencing challenging trading conditions, with low consumer confidence continuing to dampen consumer retail spending in fiscal 2013.
Woolworths has also been in a battle for dominance of Australia's supermarket sector with rival Coles, owned by conglomerate Wesfarmers, which has wooed customers with discounts and aggressive advertising campaigns.
Mr O'Brien said that while liquor sales had grown by 12 per cent to $6.6bn, it had not inflated food and liquor sales overall, which grew by just 3.8 per cent.
Analysts have previously speculated that without its rapidly growing liquor division, led by big-box chain Dan Murphy's, Woolworths would struggle to record positive comparable-store sales growth from its food and liquor division.
Morningstar analyst Paul Dekkers said while the result was in line with market expectations, it was less than the company had delivered in previous years.
“This result just doesn't have the punch the market expects from Woolworths,” he said.
“Margin performance in the engine room - Australian food and liquor - is just off the pace,” he added, noting that earnings before interest and tax for the division grew by just 5.2 per cent, well below the 15 per cent growth seen at Coles.
Mr Dekkers described Big W's 0.8 per cent EBIT growth as “commendable in the difficult environment,” but said it paled beside Wesfarmers-owned rival Kmart, where EBIT grew by 30 per cent over the past financial year.
Woolworths has forecast net profit growth of between 3 and 6 per cent for the current financial year, a prediction Mr Dekkers described as “nothing special” and only slightly above the last financial year's increase.
Mr O'Brien said he could “only concur with the views of many of my colleagues - both the Australian and New Zealand retail sectors continue to experience challenging trading conditions with lower consumer confidence continuing to dampen consumer spending”.
“The global uncertainty ... will not be moving away any time soon and the election years historically in Australia have tended to play on consumers' minds as well,” he said.
Despite the tough retail environment, Woolworths said it expected further earnings growth in fiscal 2013, with net profit from continuing operations expected to grow 3-6 per cent.
Excluding a $420 million loss from the electronics division, which includes a previously announced $300 million provision, Woolworths' profit from continuing operations was $2.18 billion, slightly higher than the $2.17 billion average forecast by five analysts surveyed by The Wall Street Journal.
The continuing-operations profit was up 3.6 per cent on the previous year, in line with June guidance of 2-6 per cent growth.
The company said it would pay a final dividend of 67c a share, up from 65c the previous year.
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