Woolworths' fails to impress

Woolies' results indicate why you need to consider macro, as well as industry and firm-specific information when looking at ratios over time.

The effects of the stimulus package mean that future sales growth may not match recent growth, as per this report in the Herald suggests:

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 package and people choosing to shop for pricier food over eating out at restaurants.

Woolworths' argument is that retail sales grew at unsustainable rates last year thanks to the stimulus package, and that a two-year growth rate comparison is more valid. Its two-year sales growth average was 6.5 per cent.