Investors were not enthused about Woolworths’ September quarter update, despite the numbers looking good on paper as the sales performance was held aloft by another surge in online sales to a new high.
It would seem some focused instead on the commentary, with the description of three months to September quarter as a “most challenging Covid quarter”.
With store trading restricted in NSW (especially Sydney), Victoria (especially Melbourne) and the ACT for the quarter (and small lockdowns elsewhere from time to time) Woolies online sales soared to well over $1.8 billion or more than $600 million a month.
Woolies said on Wednesday that total sales across all divisions for the three months to the end of September grew 7.8% to $16 billion, but those online sales surged 53% to $1.879 billion.
The shares fell more than 4% to a month low of $38.66 before investor support returned and dragged them back to $39.16, down more than 3% for the day and well off the all-time high of just over $44 earlier in the year.
“[This quarter] has arguably been the most challenging COVID quarter for our business, with the Delta variant causing major disruptions to our supply chains and stores, especially in NSW and Victoria,” CEO brad Banducci said in the trading update.
The fixed revealed the varying impact of the lockdown. In-store supermarket sales fell for the quarter, down 0.6% to $10.5 billion but rose 2.7% on a comparable basis, which accounts for the impact of closed or new stores.
While this was lower than analyst expectations around 3.5%, the apparent underperformance was nothing to worry about because analysts were basically taking a stab in the dark.
Online sales did a lot better than forecast with the sharp rise to $1.87 billion for the quarter while the recently acquired food services division PFD also made its maiden contribution to the company, helping more than triple Woolworths’ B2B food segment sales to $656 million.
Department store Big W’s sales were hit hard by the lockdowns with sales falling 17.5% for the quarter to $920 million due to tighter restrictions on store trade for the division, with a number of sites in Victoria and other states only able to open for click and collect.
Due to this, Big W’s e-commerce sales more than doubled to $233 million as a result.
New Zealand food sales up 13% year on year to $1.96 billion
COVID-related costs, such as cleaning stores, worker payments and supply chain charges, jumped to $102 million for the quarter, double what the business spent across the entire second half of the 2021 financial year.
Mr Banducci said trading through October so far had slowed as NSW and Victoria began to re-emerge from their lockdowns, though this had benefited Big W’s sales, which were improving but would be dependent on a strong performance come Christmas time.
“Our focus is now firmly on Christmas and the festive season more broadly. While the outlook remains uncertain and there are likely to be challenges in the weeks ahead, we are excited about helping our customers celebrate a much-needed festive season,” he said.
