By Byron Kaye and Sameer Manekar
SYDNEY (Reuters) -Top Australian grocer Woolworths Group Ltd said an inflation-driven shift away from dining out was helping to lift sales, sending its shares higher after its half-year profit beat forecasts despite cost pressures.
Woolworths and smaller rival Coles Group (OTC:CLEGF) Ltd have experienced wild swings in Australian consumer behaviour since COVID-19 lockdowns in 2020 sparked grocery stockpiling. Sales cooled once lockdowns lifted in 2021, and again through 2022 as soaring energy and wage bills pushed up shelf prices.
But cost-of-living pressures - from soaring power bills to nine interest rate hikes since last May - were now starting to benefit supermarkets as shoppers opted against out-of-home consumption, Woolworths said on Wednesday.
Food sales since the start of 2023 were up 6.5%, almost in line with inflation, compared to growth of just 2.4% in the six months to end-December, the company said.
"The move to trading in (restaurant meals) to eat at home has started to happen in a more pronounced way," Chief Executive Brad Banducci told reporters.
Some people have always eaten mostly at home, but more customers from all demographics are now cooking meals because dining out is getting more expensive, he said.
Net profit before significant items - mostly employee backpay related to a historic wages error - rose 14% to A$907 million ($622 million), beating a Visible Alpha consensus of A$877 million.
As with Coles' interim result reported on Tuesday, the Woolworths profit gain was helped by a sharp decline in COVID-19 related expenses.
Woolworths shares were up 2% by midsession, against a 0.3% dip in the broader benchmark, as analysts cheered the prospect of profit margin growth at a company exposed to rising supply costs.
"Momentum in the key Australian Food business remains solid, with sales growth rates better than expected in early 2H23," E&P Financial retail analyst said Phillip Kimber in a client note.
Woolworths declared an interim dividend of 46 Australian cents per share, compared with 39 Australian cents a year earlier.
($1 = 1.4586 Australian dollars)