Woolies’ problem children still weigh

Food, liquor and petrol - which commands 80 per cent of Woolworths earnings - have hit a strong growth groove, its hotels business is robust but Big W remains in trouble and is losing earnings as the entire chain is transformed.

His ambitions were lofty, with Mr O’Brien mapping out the earnings benchmark by which his tenure at Woolworths should be judged by investors, namely his intention to chase high single-digit sales growth as well as 10 per cent earnings per share growth.

Now O’Brien feels the confidence to cast his eye over the remaining 20 per cent of the business, namely the transformation of its struggling Big W retail banner group, hotels and the biggest problem child - Masters hardware whose losses have blown out from $138. 9 million to $169 million this year.

O’Brien, the former supermarket shelf stacker from Penguin, Tasmania, who rose to become CEO, believes Woolworths can have all divisions firing at once, something Wesfarmers boss Richard Goyder would also love for his conglomerate with his dynamic Coles supermarkets and Bunnings chain held back by lacklustre coal and Target.

Three years later and he is making some headway to that earnings finish line, with this morning’s full-year result which showed Woolworths net profit up 6. 1 per cent to $2. 45 billion, and sales up 5. 9 per cent to $60. 8 billion.

Three years ago an energised, less battle-scarred Grant O’Brien presented to the market his strategic vision for the supermarkets, liquor and merchandise giant Woolworths that he had just been handed the reins to by former boss Michael Luscombe.

Throw into the mix a tough trading environment characterised by cautious shoppers who need to pushed, prodded and cajoled to spend, and a legion of existing and new competitors snapping at its heels and Woolworths’ executives will need to discover some kind of miracle tonic if they want to deliver anytime soon to their boss the aggressive profit target he set out back in November 2011.

The hard work has been done in food, liquor and petrol (which account for 80 per cent of earnings) with its results this morning revealing ongoing momentum thanks to improved comparable store sales, EBIT growth and market share.

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Just how tough it is to grab hold of the sprawling Woolworths business - which is very much like the conglomerate run by rival Wesfarmers with its various business divisions that can fire off in different directions - is becoming very clear to O’Brien.

O’Brien remains doggedly focused on his profit target and won’t let go, no matter how depressed the consumer is at the moment, nor how much of his business is threatened by the competition regulator like when he had to curb his popular petrol shopper docket discount scheme.

Read more here: SMH

    

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