Woolworths posts challenging Q3

Date : 03 May 2016

Woolworths has reported that Q3 sales from continuing operations in the 13 weeks to 3 April 2016 declined 0.7% to AU$14,400m.

Australian food, liquor and petrol sales declined 0.6% to AU$11,736m

Australian food and liquor sales in the period grew 0.4% to AU$10,659m, however LFL store sales declined 0.9%. Although Woolworths said that customer numbers increased in the quarter, growth was impacted by its ongoing investment in price (average prices down 2.4% compared to the previous year) and declining items per basket.

Woolworths continues to focus on rebuilding its business, with renewed investment in price, especially in fresh food, in April and investing in more team hours in-store, particularly at weekends. In Q3, Woolworths opened one net new supermarket, refurbished a further five supermarkets and closed three Thomas Dux stores. In Liquor, Dan Murphy's continued to perform well, with one net new store opening in the quarter, whilst BWS recorded positive LFL growth, despite two net store closures.

Petrol sales cause a drag on total Australian performance

Petrol sales declined 8.8% to AU$1,077m due to a 3.2% decline in LFL volumes and an 8.1% drop in average fuel prices. Volume declines were explained by significant competitor openings. Alongside this, total merchandise sales growth also slowed to 3.6% or 1.1% on a LFL basis.

Despite Woolworths saying that sales cycled strong promotional activity in the previous year, this result will be disappointing given Coles reported an 8.1% LFL increase in sales from its Coles Express stores in its Q3 results. Woolworths opened two net new stores during the period. 

New Zealand supermarkets grew 3.8% to NZ$1,557m

LFL sales grew 0.9%, despite deflation of 0.7%, as the retailer continued to invest in price through its 'Price Down' campaign. The retailer is also focused on improving customer service, with customer perception in this area improving.

Further AU$150m investment in H2

The retailer aims to invest another AU$150m in price, service and loyalty in the second half of the year and will continue its review of its general merchandise business, which saw sales decline 4.6% in Q3. Woolworths has been clear to state that it is in the first year of a three to five year journey to restore sales momentum in the business. Although, its CEO Brad Banducci is confident it is on the right track and a group wide review of all aspects of the business is still under way, in our opionion it will take significant time for the retailer to regain momentum and the trust of shoppers.