Food and liquor drive sales rise at Woolworths

Woolworths has credited its transformation program, now in its second year, for helping it ride a wave of stronger sales at its flagship food and liquor division.

However, the nation's biggest retailer is still relying on promotions and discounts to keep shoppers coming through the door.

On Tuesday, Woolworths reported sales for the year to June 30 had risen 4.3 per cent to $59.16 billion, despite weak consumer confidence and low inflation. Sales were 2.4 per cent stronger when stripping out the impact of an extra week's trading in fiscal 2013.

The chain said its transformation program had been "rewarded with a strong sales result".

"Momentum continues to increase in Australian food and liquor with comparable sales growth for the second half higher than the first half and the prior year," Woolworths chief executive Grant O'Brien said.

Woolworths shares fell as much as 4 per cent on the release of the sales result, before closing 55¢ lower at $33.22.

At its food and liquor division, which generates 76 per cent of total group sales, comparable store sales rose 2.9 per cent for the fourth quarter, against a 1.3 per cent lift in the fourth quarter of last year. Full-year sales at its Australian supermarkets were up 2.7 per cent, against 1.1 per cent in the previous year.

Average Australian supermarket prices fell 2.9 per cent for the year and 3.5 per cent for the fourth quarter.

Big W saw sales grow by 4.9 per cent for the year but, on a like-for-like basis, were 0.7 per cent weaker for 2013. The previous year, Big W sales were down 1.5 per cent.

Commonwealth Bank retail analyst Andrew McLennan said the fall in Woolworths' share price after the release of its full-year sales results could, in part, be a reaction to the weak Big W figures.

He said the Big W figures had been hit by poor weather, which affected clothing sales, but added that the food and liquor sales results were fine.

"The market was quite a bit weaker in the fourth quarter," he said. "The fact that they haven't fallen by too much ... is a reasonable outcome.

"However, they are talking about deflation accelerating a little bit, so clearly any of the bulls on the supermarket stocks that were thinking inflation is coming back [are] going to be [disappointed]."

Woolworths' hotels division was helped by acquisitions and changes to Victorian gaming legislation, sales rising by 22 per cent for the year.