INVESTORS have ignored Woolworths' ''never mind the width, feel the quality'' argument for its reduced first-half sales, stripping more than $800 million from the value of its shares.
The chief executive of the supermarkets, petrol and liquor giant, Michael Luscombe, took the unusual steps of reaffirming the group's profit guidance for the full year, and introducing a growth measure to show returns in the past two years, as he tried to persuade stockbroking analysts all was well.
He also took a sideways swipe at competitor Coles, saying German import Aldi was now its competitive-pricing benchmark in supermarkets, and warned that the June quarter could turn into a consumer paradise as retailers tried to beat last year's stimulus-inflated sales figures.
Woolworths' spin on its performance had little impact on an already skittish sharemarket - its shares closed near their day's low, down 68¢ at $26.80 - a fall that far exceeded the general market.
For the 27 weeks to January 3, Woolworths was able to lay claim to a 4.2 per cent increase in total sales to $27.2 billion - about an extra $4000 a minute through its cash registers for the half.
The percentage sales growth was, however, half the gains it recorded last year when, as Mr Luscombe put it, ''we had all the moons aligned'' - lower petrol prices and interest rates, the Federal Government's stimulus cash for consumers and people choosing to shop for better quality, more expensive food over eating at restaurants.
Essentially, Woolworths' argument is that retail sales grew at unsustainable rates last year because of the stimulus package, and that a two-year growth rate comparison is more valid. On this argument, Woolies' two-year sales growth average was 6.5 per cent.
Mr Luscombe said the retail price of many goods had been static or fallen, which meant that even though Woolies could lay claim to more customers, many of whom bought more items each visit, the total value of their shopping was less - hence the limited increase in sales.
As official figures showed yesterday, the ''premiership'' quarter for retailers, December, saw inflation slow further.
On Woolies' own inflation measure (it uses a larger basket of goods than the Government), December was up 0.4 per cent compared with 5.3 per cent in 2008. For consumers this has meant, for example, a product such as milk dropping from $2.39 for a two-litre bottle, to $2.09.
Mr Luscombe asserted that Woolies' business structure was, however, capable of coping and that, excluding its petrol business, sales growth should be ''in the upper single digits'' for the full year.
More importantly for investors and analysts, ''earnings before interest and tax will continue to grow faster than sales [and] we also expect net profit … will grow in the range of 8 per cent to 11 per cent''.
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