Woolworths shares rose sluggishly yesterday after the country’s biggest supermarket chain revealed a set of underwhelming sales figures for the first quarter.
The shares ended up nearly 1% at $28.70, which, based on the weak sales figure, was a generous outcome.
Woolies reported its slowest like-for-like (same store) food sales growth in two years after losing customers to Coles during the latter’s Little Shop promotion and the removal of single-use plastic bags.
Same-store sales at Woolworths Australian supermarkets rose 1.8% in the three months ending September, down sharply from the 3.1% growth rate in the June quarter and 4.9% in the September quarter of 2017.
It was the slowest growth since the September quarter two years ago when same-store sales rose 0.7%.
Total grocery sales were up 1.9% to $9.9 billion, with 3.3% of that now coming from online sales which grew at 26%.
Woolworths’ result was better than market forecasts – analysts had set the bar very low (to make themselves look good?) and had been expecting same-store food sales to slow to between 1% and 1.5%
Woolies CEO, Brad Banducci said momentum improved materially in September and October, when Coles’ Little Shop promotion had come to an end, and he claimed that Woolworths’ market share by the end of the quarter had broadly returned to that in the June quarter.
Coles reported first-quarter sales growth of 5.1% on a same-store basis which was the first time in two years Coles has wrested back bragging rights – nicely timed for the split from parent Wesfarmers which is underway as you read this.
Both chains ended free “single-use” plastic bags from their checkouts nationwide in late June and July, but Coles continued to give their’s away free while Woolies started charging.
“Australian Food had a challenging start to the quarter with sales impacted by our customers’ and team’s adjustment to the removal of single-use plastic bags as well as the impact of a competitor continuity program,” Woolworths said in a statement yesterday.
Woolworths’ total transaction growth was down to 2.1%, compared to 4.6% in the same quarter last year, while the value of each transaction – or “basket size” – fell 1.5%, excluding the sale of reusable bags.
Average prices across Woolworths’ supermarkets fell 1% in the quarter, with fruit and vegetable prices flat following deflation of about 10% in the prior quarter. Wednesday’s September Consumer Price Index report showed a 2.4% rise in fruit prices in the quarter. the ABS said vegetable prices were up2.2% in the quarter.
Woolies said that excluding fruit, vegetables, and tobacco, average prices fell 2.6%.
Liquor sales through Dan Murphy’s and BWS, saw comparable sales rise 1.7% in the quarter.
The company’s struggling department store chain, Big W’s total sales grew 1.3%, with comparable sales up 2.2%, thanks to strong online growth and a successful Toy Sale campaign.
However, Woolworths said sales of Big W’s summer products had been below expectations due to a slow start to the season.
Meanwhile Woolworths’ pub and poker machine business grew revenue by 0.5% to $443 million in the quarter.
