Source: Bloomberg

Story By: Robert Fenner

Woolworths Ltd. (WOW) and Wesfarmers Ltd. (WES), Australia’s biggest supermarket chains, may report higher sales because shoppers continue to buy essentials as stalling consumer spending hurts clothing and electronics retailers.

Woolworths, Australia’s biggest retailer, will post fourth- quarter grocery sales growth of 4.8 percent tomorrow, according to the median estimate of three analysts surveyed by Bloomberg News. Second-ranked Wesfarmers may report expansion of as much as 6.3 percent on July 28, according to Credit Suisse Group AG.

The nation’s households are boosting savings and curbing spending amid natural disasters and falling home prices while the Reserve Bank of Australia maintains the highest official interest rates in the developed world to deal with a commodities boom. A slump in consumer sentiment this month, the biggest decline since the collapse of Lehman Brothers Holdings Inc. in 2008, is prompting people to scale back purchases of discretionary items such as clothing and electrical goods.

“People still need food and can’t put it off, so that protects Wesfarmers and Woolworths,” said Chris Weston, an institutional dealer at IG Markets in Melbourne. “Discretionary retail at the moment is a macroeconomic story, and it’s not a good macro picture outside of resources right now.”

Supermarket operator Woolworths may report a 6.4 percent increase in total sales in the quarter ended June, according to Craig Woolford, an analyst at Citigroup Inc. in Sydney. Woolworths gets 86 percent of its A$52 billion ($55 billion) annual sales from food, liquor and fuel in Australia and New Zealand.

“Overall Woolworths sales trends are likely to be encouraging, especially given a volatile retail industry backdrop,” Woolford, who recommends buying the stock, said in a July 15 report.

Woolworths shares have gained 1.5 percent this year compared with a 5.8 percent drop in the benchmark S&P/ASX 200 index. Perth-based Wesfarmers, which owns the Coles supermarket chain as well as Bunnings home improvement outlets, has slipped 5.8 percent in the same period.

To read the full story, follow this link: www.bloomberg.com/news/2011-07-18/australia-grocers-may-post-higher-sales-as-cautious-consumer-crimps-rivals.html