high expectations, page-3

CML will continue to payoff tomorrow. I'm still expecting the WOW and CML chare prices to meet.

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SYDNEY (Dow Jones)--Australia's biggest retailer Woolworths Ltd. (WOW.AU)
Tuesday reported lower than expected third quarter sales, acknowledging the
impact of a discount fuel strategy by rival Coles Myer Ltd. (CML.AU).
Woolworths booked sales of A$6.48 billion for the 12 weeks ended April 4, up
5.3% from A$6.15 billion a year earlier. Analysts had expected growth of about
7% in the latest period.
The supermarket division, which includes its food, liquor and fuel operations
and generates the bulk of its earnings, reported a 4.9% jump in sales to A$5.67
billion, from A$5.41 billion a year ago.
With 345 petrol outlets providing solid returns for Woolworths, this strategy
of luring customers into its supermarkets was matched by Coles Myer last July in
its home state of Victoria. With Shell Australia as its partner, Coles Myer is
aiming to have 580 fuel outlets around the nation.
But plans by Woolworths to open more outlets through a deal with Caltex
Australia Ltd. (CTX.AU) have been held up by red tape, giving Coles Myer a
chance to boost market share.
Woolworths managing director Roger Corbett defended the group's third quarter
sales result, which he described as "pretty resilient".
"I said to the market way back when I released the half year results at the
beginning of the calendar year, that I would expect some rebalancing of the
market place," he said.
"And I think the market place expected that you can't open 580 petrol stations
that weren't there one year, and are there the next, without having some
impact," Corbett said.
Woolworths expects to complete its fuel deal with Caltex this week, allowing
the rollout of an additional 100 outlets to commence next week.
Commsec retail analyst Craig Woolford said Coles Myer's fuel strategy has hurt
Woolworths' food and liquor sales, which rose 3.7% in the third quarter,
compared to the 5.1% jump in the latest nine months.
"Comparable stores sales growth of 2.3% is the most alarming statistic,"
Woolford said.
Credit Suisse First Boston retailer analyst Michael Jenneke said "the
company's credibility risks being damaged by a weaker sales performance"
The fourth quarter "needs to strengthen significantly to meet management
guidance on likely comparable sales growth" for the second half, Jenneke said in
a note to clients.
The disappointing result led to switching out of Woolworths into Coles Myer
shares during the local trading session. Woolworths fell 45 cents or 3.8% to
close at a two month low of A$11.50. Coles Myer rose 10 cents, or 1.2%, to
A$8.40.