Woolworths defends fuel vouchers

Retail giant Woolworths is adamant its fuel discounts aren’t bad for competition, despite strong criticism from the consumer watchdog.

Australian Competition and Consumer Commission boss Rod Sims this week warned fuel dockets offered by Woolworths and Coles made it hard for smaller operators to compete and may harm consumers in the long run.

But Woolworths, which on Tuesday announced sales across its businesses topped $59.2 billion last financial year, has rejected the charge.

“The (fuel) market has had, as a part of it, these petrol discounts for 17 years,” Woolworths CEO Grant O’Brien said.

“I’ve looked at the numbers for the last decade or so and there has been no pronounced shift in volumes from the independents or other players in the market.”

Woolworths, like fellow giant Coles, gives customers discount vouchers to use at its service stations, once they spend a certain amount at its supermarkets.

O’Brien said the discounts were in the best interests of consumers.

“How can better prices on groceries and better prices on fuel be a bad thing for consumers at this point in time?” he said.

Woolworths, which in addition to its supermarkets and petrol station businesses owns a string of retailers including Dan Murphy’s, BWS, Big W and hardware store Masters, recorded a 2.4 per cent increase in sales during 2012/13.

The company sold more than $59.2 billion worth of goods during the year, most of it in its food and liquor businesses. Resource-9

But the sharemarket reacted negatively to the news, with Woolworths stocks down 1.6 per cent on Tuesday.

Invast chief market analyst Peter Esho said the sales results showed that, with consumer confidence still relatively soft, the company was having to cut prices and spend more to lift sales.

“The extent of deflation in pricing is increasing and that means they are having to push more volume to grow their earnings,” he said.

“They are having to invest more money into their supermarkets and sell a lot more product to eke out any sales growth gains.”

But O’Brien said Woolworths’ current expansion activities would help it return to double digit sales growth in the future.

The company increased online sales 42 per cent last financial year and hopes to push above the $1 billion mark this year.

It has also rolling out its Masters brand at a high cost – with profit results due in August set to show its home improvement division lost $139 million for 2012/13.

AAP

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