Woolworths post strong profit, but hurdles to Danks takeover emerge

Wooloworths has reaffirmed its status as a blue chip stock this morning with another impressive profit result, but some stumbling blocks are emerging in its quest to acquire hardware distribution company Danks.

Just two days after Woolworths announced plans to takeover Danks and launch a new hardware business in a joint venture with US hardware giant Lowe’s, independent Senator Nick Xenophon has called on Australian Competition and Consumer Commission to block the deal.

Xenophon says the deal will be the “nail in the coffin” of the independent hardware stores that Danks supplies through its wholesale distribution business.

“Woolworths will know which stores are doing well, which stores are worth taking over and which stores can be put out of business,” Senator Xenophon said in a statement.

“The proposed deal cannot be allowed to go ahead.”

Woolworths reported a net profit of $1.8 billion for 2008-09, an increase of 12.8% on the previous corresponding period.

Chief executive Mike Luscombe says that while the company and the Australian economy have performed well in the last 12 months, the outlook is less than certain, with the Federal Government not planning any more cash handouts.

“Australia has fared well to date in the global financial crisis, assisted by significant government spending during the previous 12 months. This spending will not be replicated to the same degree in FY10,” the company said in a statement.

“Discretionary spending will continue to be influenced by macro-economic factors, such as interest rates, petrol prices and confidence around employment.”