Shares in Woolworths fell to their lowest level in more than a month on Thursday after the country’s biggest retailer and supermarkets group produced weaker than expected sales figures for the third quarter.
Comparable sales for the first three months of the year fell 2.1% to $11.1 billion for the business’ key supermarkets division, a bigger drop than the around 1% fall that analysts had been forecasting.
Total sales edged up 0.4% to $16.5 billion, mainly due to an outperformance by Big W in the quarter.
But Woolies is all about the performance of its supermarkets business and management were quick to explain the reason for the slowdown – the retailer, like all others, are now comparing sales figures with the elevated levels of the first and second quarters of 2020 when panic buying and lockdowns saw a tremendous surge in sales – both through bricks and mortar outlets and online.
In its half year result in February rival Coles warned that it could see slower or even negative sales growth in the six months to June and perhaps into 2022 from the comparison with the high levels of activity in 2020.
That’s what happened when Coles reported its third quarter sales figures on Wednesday, and having been well-warned, investors didn’t mark the stock down.
Woolies shares dipped more than 3.8% to $39.81, the lowest in more than a month and the first time the shares have been under $40 in the same period.
Woolies did caution investors at its February results, but no where near as directly as Coles did so when the weak third quarter figures emerged yesterday, down went the shares.
CEO Brad Banducci said the lower numbers were due to weaker growth in the number of items purchased by customers and deflation in key categories like fruit and vegetables.
“In general, customer shopping behaviours continue to normalise. While food customers are still shopping less frequently, the growth in the number of items customers put in their baskets is slowing,” he said.
“Customers are also shopping more on weekends, state-based performance is becoming more balanced and there is less divergence in trading across the fleet, other than in CBD and transit locations.”
However, the weaker supermarket sales were somewhat offset by another jump in sales growth at department store Big W, which grew comparable sales by 20% over the quarter to over $1 billion, continuing the big comeback from near disaster a couple of years ago.
Online sales for the retailer also continued to improve, rising 64% to $1.3 billion across the group. Woolies said digital orders now comprise nearly 8% of the company’s total supermarket sales.
Outlook for the start of the fourth quarter was subdued, with Mr Banducci noting sales were largely flat when compared to last year.
“Turning to current trading and outlook, sales growth for the first three weeks of April remained volatile and impacted by prior year growth rates and the timing of public holidays,” he said in the release on Thursday.
“In Australian Food, total sales were broadly flat compared to last year. This reflects the cycling of mid-single digit sales growth in April last year in comparison to double-digit sales growth in May and June.
“Endeavour Drinks sales in April remained above last year but are expected to slow when we cycle growth of over 30% in May and June.
“While in New Zealand, sales growth was materially negative in April, cycling growth of over 20% in the prior year.
“Big W sales growth has also slowed in the first three weeks of April, cycling growth in April last year of approximately 20%. We continue to expect sales to decline over the March to June period for all businesses other than Hotels where Q4 F20 sales declined 86.3% on a normalised basis. Despite this trading volatility, we remain focused on delivering the best possible experiences for our customers,” Mr Banducci told the ASX.
And he said that the sin-off of the Endeavour Group demerger remains on target for late June.
“Key milestones during the quarter include securing financing commitments for Endeavour Group’s proposed debt facilities and finalising board and management appointments which will be announced in due course. Subject to board and regulatory approval, demerger documentation is expected to be released in mid-May,” he said.
