Woolworths Ltd, Australia's largest retailer, yesterday reported a 28 percent rise in net profit in the last fiscal year and hinted it would step up pressure on supermarket rival Coles Group Ltd.
Woolworths' net profit for the year ending June 24 reached A$1.29 billion (US$1 billion), up from A$1.01 billion the previous year.
The result exceeded the company's forecast for 25 percent to 27 percent growth for the year and matched analysts' expectations, sending Woolworths shares up 1.8 percent to A$28.19 at yesterday's close.
Woolworths has been gaining market share at the expense of Coles over the past year, lowering shelf prices at its supermarkets to lure customers.
The company has spent more than A$4 billion on acquisitions over the past four years and is also benefiting from cost cutting and supply chain transformation.
In a statement, Woolworths said that it plans to "accelerate the reinvestment in our business in the coming year, with an accelerated rollout of many new initiatives that we have been developing."
The result was "right on the money," Commonwealth Securities analyst Grant Saligariv said.
"Woolworths is coming out and reinvesting in its own business and clearly that makes it more difficult for its competitors," Saligari said.
Coles shareholders are due to vote on A$18 billion takeover offer by conglomerate Wesfarmers Ltd in October.
Woolworths expects net profit this financial year to grow in the range of 19 percent to 23 percent, due in part to rising costs.
Sales growth is forecast in the range of 7 percent to 10 percent and it anticipates earnings before interest and tax to continue to grow faster than sales.
Woolworths said in a statement that the company was "pleased with the momentum in the business," but cited fluctuating oil prices, interest rate increases and debt markets in the US as factors in potential higher costs.
Revenue for the last fiscal year rose to A$42.59 billion, up from A$37.83 billion a year earlier.
The company declared a final dividend of A$0.39 a share, up from A$0.31 a year ago.