August 28, 2019 / 11:42 PM / a year ago

UPDATE 2-Australia's Woolworths sees 'headwinds' as consumers pinch pennies

* Net profit A$1.75 bln, matching expectations

* Strength in Australian Food boosts profit

* Shares fall on uncertain outlook (Adds CEO comment, share movement, context)

By Aby Jose Koilparambil

Aug 29 (Reuters) - Australia’s largest supermarket operator Woolworths Ltd gave investors little cause for optimism about a rebound in consumer sentiment as it reported a 9% rise in annual underlying profit on Thursday.

Chief Executive Officer Brad Banducci said that although the company was benefiting from lower interest rates and government efforts to kick-start Australia’s sluggish economy, the outlook was uncertain.

“Consumer sentiment for the first eight weeks (of full-year 2020) has been very pleasing. The question is what happens going forward... It’s still very early,” Banducci told journalists.

Woolworths said it faced “headwinds” in the current financial year from a difficult consumer environment, the cost of enterprise agreements and other cost pressures.

Woolworths shares had slipped 1.3% by 0230 GMT, while the broader market was 0.1% down.

Net profit, excluding one-off items, rose to A$1.75 billion ($1.2 billion) in the year ended June 30, from A$1.61 billion a year earlier, matching analyst expectations according to IBES data from Refinitiv.

Riding on stronger sales in the second half, comparable sales in the Australian Food segment rose 3.1% in the year, while total revenue from continuing operations climbed 5.3% to A$59.98 billion.

Woolworths’ results contrasted with rival Coles Group , which last week reported a drop in annual profit amid a discounting war.

Net profit after significant items fell 7% for Woolworths, as the company took an impairment charge on the carrying value of its discount department store chain Big W.

Consumer spending has been under pressure in Australia from record-high household debt, tepid wage growth and falling house prices, though the home market has shown signs of life in recent months.

A recovery in home market would be a boon for the economy, boosting consumer confidence and spending power.

Woolworths declared a final dividend of 57 Australian cents per share, compared with 50 Australian cents last year.

$1 = 1.4806 Australian dollars Reporting by Aby Jose Koilparambil and Ambar Warrick in Bengaluru and Byron Kaye in Sydney; Editing by Stephen Coates

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