Woolworths sales jump but company reports a loss as Big W disappoints

Adrian Lowe
The West Australian
Demand for fruit and vegetables and meat were up due to lower prices and greater availability.
Demand for fruit and vegetables and meat were up due to lower prices and greater availability. Credit: TheWest

Woolworths expects customers to remain cautious amid cost-of-living pressures even as inflation moderates and prices decline.

But the company’s outgoing boss Brad Banducci has committed to lift the performance of its discount department store Big W, where sales have declined despite expectations cost-of-living pressures would translate to stronger results.

Reporting the company’s half-year results on Wednesday, Mr Banducci — who also announced he would retire as chief executive in September — said sales were continuing to moderate into the new financial year. This reflected “lower inflation and a more cautious consumer”, he said.

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“Delivering value for our customers remains our number one priority for H2,” Mr Banducci said.

The company reported a loss after tax of $781 million, having already foreshadowed a substantial writedown in its New Zealand supermarket business.

Sales in the company’s Australian food division increased 5.4 per cent to $25.9 billion in the six months to December 31, with demand for fruit and vegetables and meat up due to lower prices and greater availability.

The company reported average prices increased 1.3 per cent in the second quarter compared to 2 per cent in the first quarter of the financial year and 7.7 per cent in the year prior.

Across the group, the company reported a post-tax profit before significant items of $929m over the half, a 2.5 per cent increase from the prior year, and a 4.4 per cent jump in sales to $34.6b.

Big W had a particularly challenging half, Mr Banducci said, with sales down 4.1 per cent and pre-tax earnings down 60 per cent to $54 million.

“Our everyday range continued to resonate with customers, however more discretionary categories such as home underperformed as customers were increasingly cautious and traded down to lower price products,” he said.

“Outside of solid trading in key events like Black Friday and Christmas, customers are increasingly cautious and trading down. Lower sales together with elevated wage inflation and clearance activity ... had a material impact on earnings.

“Despite this, closing inventory was below the prior year as we carefully managed seasonal stock through markdowns.”

Big W sales have fallen 6 per cent in the first seven weeks of the second half of the year. While the company expects an improving sales trend by April, the second half of the financial year was typically a lower profit half for Big W, Mr Banducci said.

The growth across the group came from eCommerce division WooliesX, which is led by incoming group chief executive Amanda Bardwell, who will replace Mr Banducci in September.

WooliesX was responsible for about two-thirds of pre-tax earnings growth in the Australian food business. Its sales increased 27.5 per cent in the half as more customers tapped into “direct to boot” and same-day delivery options, while its in house media business Cartology also had increased revenue of almost 15 per cent.

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