Woolworths delivers bumper profit and scours the world for acquisitions

Supermarket giant Woolworths will look offshore for acquisitions as it seeks to continue its stellar financial performance.

Supermarket giant Woolworths will look offshore for acquisitions as it seeks to continue its stellar financial performance.

Despite concerns about the slowing economy, the company posted a 25.7% increase in net profit to $1.63 billion for 2007-08, meaning the retailer has posted average annual profit growth of 20% over the last five years.

But chief executive Michael Luscome has warned that sort of performance will be harder to match in 2008-09, with falling consumer sales likely to mean Woolworths posts earnings growth of between 9% to 12%.

But that won’t stop Luscome pursuing growth opportunities. He says the company is looking internationally and domestically for acquisition opportunities – it recently made an unsuccessful tilt – and the company plans to invest $2 billion in its core businesses this year, including a major revamp of its Dick Smith chain of electronics stores.

The company also officially launched its branded credit card, the Woolworths Everyday Money credit card.

The big hook with the card is a rewards program. Customers will earn points when they make purchases with the card and then receive shopping vouchers every four months that can be redeemed at participating Woolworths stores.

Like BHP Billiton, Woolworths is building a big pile of cash to give it flexibility and insurance during the coming difficult period. Indeed, Woolworths canned a much-anticipated share buyback, citing the uncertainty in the year ahead.

It’s a great lesson for all entrepreneurs; cash will be the key to growth in the downturn.

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