WOOLWORTHS' SALES BOUNCE BACK

Written on the 28 October 2016 by Lin Evlin

WOOLWORTHS' SALES BOUNCE BACK

WOOLWORTHS showed its first sales growth in almost a year as its core supermarket sales rose by 0.7 per cent in the September quarter, finishing higher than market expectations.

Lower grocery prices and a focus on customer service have lured customers back into its stores. 

Woolworths (ASX:WOW) shares initially rose on the news, but this afternoon are trading down 2.14 per cent at $24.27 per share.

CEO, Brad Banducci welcomed these latest results describing them as "good progress" and in line with the company's key priorities.

"Customers continue to respond to the improvements we are making, with Australian food delivering its first positive comparable sales growth since Q2 2015, despite ongoing material price deflation," he says.

However, he believes more must be done, highlighting the company's trading performance over the key Christmas trading period as crucial to the Group's financial performance for FY17.

Woolworths' Voice of the Customer surveys, introduced in 2015, indicates rising customer satisfaction as results increased to 76% in the quarter, up by one per cent from the previous period and up from 69 per cent a year ago.

Total food sales in Australia grew by 1.7 per cent to $9.3 billion in the 14 weeks ending October 2.  However, average prices, excluding tobacco, declined by 2.8 per cent driven by material price reductions in groceries compared to the same period last year. 

These price pressures reflect the intense competition within the supermarket industry, driven by discount players such as Aldi. 

BIG W woes continue

The Group's discount chain store BIG W's sales continues to head south, decreasing by 5.5 per cent to $880 million on the previous year with comparable sales falling by 5.7 per cent.

BIG W was squeezed by price cuts to clear unwanted or obsolete stock as well as reductions in unprofitable promotions. The company reported that toys, books and audio visual equipment performed well despite the timing of the toy sales changing compared to the previous year.  However, clothing sales were softer than expected which was compounded by the cold start to spring this year.

Liquor sales hold strong

Woolworths Group's same-store liquor sales rose by 3.8 per cent to $2 billion this quarter compared to the prior corresponding period. The company enjoyed strong activity around key sporting events such as the AFL and NRL finals period.

The Group opened three Dan Murphy stores during the quarter, bringing the total fleet size to 210.  It also opened nine BWS stores and closed 5, ending the quarter with 1,283 BWS stores in total.
 

 
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