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Australia's Woolworths sees 33% fall in profits DIY disaster pushes Woolworths to near-$1bn loss
(about 11 hours later)
Australia's biggest supermarket chain Woolworths has posted a 33.1% fall in profits for the six months to December. Woolworths, Australia's biggest supermarket chain, has reported its first loss in 23 years after writing off 3.2bn Australian dollars on its failed DIY chain.
The firm, which has interests spanning hotels, petrol and discount liquor, said net profit had come to 925.8m Australian dollars ($670m; £479.7m) for the period compared to a year earlier. It sank to a A$972.7m ($704m, £502m) first-half loss following the charge for its Masters hardware business.
Including write-downs however the supermarket said it had reported a record year-on-year net loss of A$972.7m, a fall of 176%. Woolworths said last month it would sell or close Masters, which failed to win enough customers.
Shares fell 5% on the news. Brad Banducci, the head of food, will become chief executive.
Its Sydney-listed shares had recovered some ground later to be down 2.5%. Grant O'Brien said last June that he was stepping down as chief executive after taking up the role in October 2011.
The company has been facing stiff competition from discount rivals and is in the process of rebuilding its business. The retailer issued a series of profit warnings last year amid intense competition in the grocery market and heavy losses from the Masters chain.
It said the latest result was a reflection of the significant changes it was going through. Chairman Gordon Cairns said Mr Banducci, who had 25 years of retail experience and previously ran the company's liquor retailing operations, was "uniquely positioned" for the role.
The Australian giant also said its half-yearly result had been "heavily impacted by the decision taken to exit the home improvement business", among other issues. "He clearly understands the Australian market, has a total commitment to our customers, and a great track record of growing valuable businesses," he said.
"Australian food, liquor and petrol reported a decrease in earnings before interest and tax of 31.7%", the company said. Sales fell 1.4% to A$32bn, reflecting lower trading in food and general merchandise and the sale of 131 stores at Caltex petrol stations.
'Much to do' "This turnaround is three to five years and it will not be three to five minutes," said Mr Cairns.
Woolworths said it was shifting focus to its supermarket business so that it could compete "vigorously" against its rivals and improve its customer service. Woolworths said it was shifting focus to its supermarket business to compete against rival Coles as well as discounters such as Aldi and Lidl, both relatively recent entrants to the Australian market.
On Friday it also announced it had appointed a new chief executive and managing director, Brad Banducci, who has been with the company for five years. Woolworths shares closed 2% higher in Sydney on Friday, but are still down by a third over the past 12 months.
The supermarket's chairman, Gordon Cairns, said Mr Banducci had been managing the turnaround of the firm's supermarkets business for the last 12 months and that he had led its liquor brand Dan Murphy's "to become one of Australia's great retailers". Excluding the write-offs, the company posted a net profit of A$925.8m ($670m; £479.7m) for the six months to December, down 33% on the same period in 2014.
But Mr Cairns said there was much to do in order to see Woolworths' results improve and that it would be a "three to five year journey" to rebuild the business. The company cut its interim dividend by more than a third to 44 cents a share.