Woolworths' tills ring loudly as net profit hits $1.6bn

The company blamed macroeconomic factors, including interest rates, petrol price volatility, inflation and consumer confidence for the more modest growth expectations for the company's stores. These include Dan Murphy liquor stores and Tandy and Dick Smith electronics as well as the company's supermarkets.

Woolworths has also shelved plans for a share buyback after indicating previously it would undertake "capital management" activity during 2008. Finance director Tom Pockett said it was not the right time for adjusting the company's gearing levels given the state of world finance markets.

"With basically the equity and the debt markets in quite a large amount of turmoil right at this time, we've decided to defer that and I think it's prudent to do that," Mr Pockett said.

The decision to retain earnings comes despite the failure of talks with JB Hi-Fi earlier this month over a possible takeover of the home entertainment retailer.

In a note to clients, Citi analyst Craig Woolford said: "The lack of capital management and limited detail around offshore expansion may raise concerns about the risk potential within (Woolworths)."

Woolworths has previously said it is considering overseas acquisitions. While chief executive Michael Luscombe declined to identify specific opportunities the company was evaluating, he made clear that it would be looking at businesses similar to those it already operates.

"These businesses have to be high-volume, low-margin businesses, so very much in our model," he said.

Mr Luscombe disputed a claim made last week by supermarket rival Coles that it had stemmed the loss of market share it had earlier been experiencing.

"I believe in our businesses, particularly in food, that we've grown our market share again, and widened the gap on our competitor. In fact, the numbers that I see absolutely tell me that," Mr Luscombe said.

During the year the company continued to enjoy the benefits of its ongoing store refurbishment program. Its net profit after tax rose 25.7% to $1.63 billion while earnings before interest and tax jumped 19.8% to $2.5 billion.

As the company revealed last month, sales revenue grew 10.7% to $47billion. Woolworths will pay a dividend of 48 on October 3, bringing its full-year dividend to 92.

Mr Luscombe said the first seven weeks of the new financial year had been "a good start".

Shares in Woolworths fell 16 to $26.70.

LINK

? www.woolworthslimited.com.au