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Woolworths feels the pinch as consumer electronics continues to slide.

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Woolworth’s latest H2 2011 results, just announced, reveal net profit fall of 16.8% due to discontinued operations and $300 million provison it was forced to make for the divesting of Dick Smith, it said today.

In January last, Woolies said it would sell off its Dick Smith electronics operation, and would close over 25% of its stores immediately here and New Zealand due to poor performance.

As a result of the divestment, Consumer Electronics division has been disclosed as a ‘discontinued operation’, forcing it to make $300m provision and dragging earnings for H2 down for the Woolworth’s group.

Dick Smith sales increased just 0.7% for the half year to December, a disappointing result in what should be one of its busiest trading period including Christmas, although comparable store sales did increase 2.4%.

However, Woolies said sales for second quarter were “pleasing” given that consumer electronics continues to be impacted by the poor trading environment, price competition and price deflation in key products.

The new format DS stores, which now account for 74% of all stores also continue to outperform older format stores and enjoyed sales growth of 8.7%, which could read as a sales pitch to any potential buyer.

The process of getting rid of its electonics business is now underway and a “number of potential purchasers have expressed interest,” Woolworths Group said today.

Read: Woolies Give Dick Smith The Boot

Apart from electronics, Woolies’ other businesses are booming as total sales grew 5.2% to $ 28.9bn. Food and Liquor sales for the half-year were $19.6 billion – an increase of 4.3% on last year.

Earnings before tax grew 4.1% from continuing operations (total Group EBITDA before Consumer Electronics $300m provision was up 3.9%).

Net profits from Woolworths’ ‘continuing’ group operations including food, liquor and home improvement divisions which also grew to $1.1bn – up 3.1%, before consumer electronics was taken into account, the supermarket giant said.

Consumer Electronics’ New Zealand sales increased 2.2% for the half year and comparable sales increased 6.5%, which it said was “strong” given New Zealand challenging macroeconomic environment and significant price deflation.

Sales for BIG W, however, fell 1.3% for the half year to $2.4 billion. Comparable sales fell 2.8%, compared to a decrease of  4.2% in H1.

Customer numbers and items sold increased during the second quarter (Oct-Dec period) although price deflation continued, averaging 5% and was most evident in Home Entertainment and Toys categories, the giant confirmed.

“Trading over the Christmas was pleasing with positive customer and unit growth in December offset by deflation resulting in lower average basket sizes.” 

Strong results were achieved in DVDs, Books, Toys, Sporting categories whilst cooler weather in December had a “modest” effect on apparel and outdoor categories.

 

Earnings at the discount store fell 4.3% to $119.6m, however Woollies said the result for the second quarter was pleasing and showed positive growth, compared to 2010.

“Woolworths Limited today reported an increase in net profit after tax from continuing operations of 3.2%. It was also pleasing to achieve an increase in our trading result of 5.6% before central overheads and our investment in Home Improvement,” said Woolworths Chief Executive Officer, Grant O’Brien.

“This is a sound result considering subdued consumer confidence,deflationary pressures and the significant investment we are making in the business in line with ourstrategic priorities for growth.”

Woolies also announced a 3.5% increase in fully franked interim dividend to 59 cents per share.

Currently there are 386 Dick Smith stores between Australia and New Zealand. In January Woolworths will close up to 100 of these stores before the sale over two years.

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