Food and liquor sales for Woolworths ‘disappointing’ in third quarter
Australian supermarket giant Woolworths’ third quarter results have shown some improvement in its food and liquor business, but sales in the 13 weeks to 5 April 2015 were still “subdued”.
Woolworths has today also announced a new strategic approach in its Food and Liquor business. Woolworths Chief Executive Officer, Grant O’Brien said the new leadership teams in Woolworths’ Australian Food and Liquor business “have clear plans in place to restore sales momentum and extend our marketing position”.
Group sales results
Woolworths reported that its overall sales for the third quarter were $15 billion, an increase of 3 per cent on the previous year excluding Petrol, or a decrease of 1.6 per cent including Petrol. Woolworths said its Petrol business was impacted by changes to the Woolworths-Caltex alliance and declining fuel sell prices.
“Easter falling largely into the third quarter this year has created a timing difference when compared to last year. Adjusting for the timing of Easter, third quarter sales increased 2.3 per cent excluding Petrol,” Mr O’Brien said. “At the half year 2015 results, we informed the market that Australian Food and Liquor sales in December and January were disappointing. While February and March showed some improvement as we commenced the actions announced in February, April was more subdued and there is still much to do,” he said.
Australian Food and Liquor
Woolworths reported that Australian Food and Liquor sales for the quarter were $10.6 billion, an increase of 2.3 per cent on the previous year or 1.7 per cent Easter adjusted. Comparable store sales for the quarter increased 0.7 per cent or 0.2 per cent Easter adjusted.
Woolworths said it had continued to lower its prices for customers as reflected by deflation in average prices of 2.4 per cent for the third quarter (Q2’15: deflation of 1.6 per cent) when the effects of promotions and volumes are included.
The standard shelf price movement index, which excludes investment in promotional activity, increased 2.4 per cent for the quarter (Q2’15: 3.5 per cent), easing from the prior quarter as a result of lowering prices on everyday items for as well as cycling prior increases in tobacco excise.
Woolworths reported that new store openings during the quarter included five Australian Supermarkets bringing the total to 952, one Dan Murphy’s bringing the total to 193 and six BWS stores bringing the total to 1,240 (including both standalone and supermarket attached BWS stores).
Woolworths reported that petrol sales for the quarter were $1.2 billion, a decrease of 35.2 per cent on the previous year or 34.8 per cent Easter adjusted (volumes decreased 20.8 per cent or 20.2 per cent Easter adjusted). Woolworths said the results were impacted by a 22 per cent reduction in average fuel sell prices (Q3’15: 120.0 cpl and Q3’14: 153.0 cpl) and the previously advised changes to the Woolworths/Caltex alliance after which sales from Caltex operated sites are no longer recognised by Woolworths.
Comparable sales (dollars) decreased 19.8 per cent or 19.3 per cent Easter adjusted and comparable volumes decreased 1.5 per cent or 0.8 per cent Easter adjusted, showing improvement after cycling the limitations on fuel discounts at the end of January.
Strong growth in merchandise sales continued, increasing 10.3 per cent for the quarter (9.2 per cent Easter adjusted) with comparable merchandise sales increasing 7.5 per cent (6.4 per cent Easter adjusted), which Woolworths said was driven by successful tailored customer offers and more effective promotional activity.
Woolworths opened four (net) petrol canopies during the quarter, bringing the total to 513.
New Zealand supermarkets
Woolworths reported its New Zealand Supermarkets’ sales for the quarter were NZ$1.5 billion, an increase of 5 per cent on the previous year (7.7 per cent in AUD).
Comparable sales returned to solid growth, increasing 3 per cent4 for the quarter (Q3’14: decrease of 1 per cent). Woolworths said this was achieved despite low inflation, reflecting investment in price.
Woolworths said its ‘Price Drop’ and ‘Price Lockdown’ campaigns continue to “resonate well” with customers, driving improved price perception results as well as growth in customer numbers and units sold.
The Countdown Supermarkets food price index for the quarter was deflation of 0.1 per cent (Q2’15: deflation of 0.5 per cent) with deflation continuing across the majority of key categories, including Grocery, Meat and Bakery.
Total Countdown Supermarkets at the end of the quarter were unchanged at 174 with total franchise stores remaining at 60.
As anticipated, Woolworths reported that General Merchandise results continue to be adversely impacted by the BIG W transformation with sales for the quarter decreasing 2.1 per cent on the previous year or 5.7 per cent Easter adjusted and comparable sales decreasing 4.1 per cent or 7.3 per cent Easter adjusted. Woolworths said sales were also impacted by the continuing decline in Home Entertainment, the clearance of seasonal apparel and ongoing price deflation (Q3’15: deflation of 2.5 per cent excluding ‘Drop Zone’ clearance activity).
During March, as part of the BIG W transformation, Woolworths launched its ‘Drop Zone’ campaign. Woolworths said it had made “solid early progress” with clearance activity to ensure its inventory is aligned to its customer strategy going forward.
Woolworths said continued positive results from new Softgoods ranges indicated further progress with its revised customer offer.
Total BIG W and EziBuy stores at the end of the quarter were unchanged at 183 and 5 respectively.
Woolworths reported that Hotel sales for the quarter were $359 million, an increase of 0.6 per cent on the previous year or 1.1 per cent Easter adjusted, with comparable sales increasing 0.2 per cent or 0.7 per cent Easter adjusted. Excluding the impact of the additional Victorian gaming tax which came into effect from May 2014, sales increased 2.1 per cent or 2.7 per cent Easter adjusted and comparable sales increased 1.7 per cent or 2.2 per cent Easter adjusted.
Woolworths said that while trading conditions remained challenging, sales momentum had shown improvement during the quarter, particularly in gaming and bars and in Queensland and Victoria.
Total Hotel venues at the end of the quarter were unchanged at 330.
Home Improvement sales for the quarter were $455 million, an increase of 21.7 per cent on the previous year (21.7 per cent Easter adjusted).
Two Masters stores opened during the quarter bring the total to 53 with Home Timber and Hardware store numbers remaining unchanged at 44.
Woolworths reported that sales in its Masters business for the quarter were $217 million, up 21.2 per cent on the previous year (19.2 per cent Easter adjusted2). Woolworths said it continued to make progress on the Masters priorities outlined in August 2014. The strategy focused on addressing range in key customer visitation categories, commencing the roll-out of its new store format and refocusing its new store opening schedule to focus on key metropolitan sites.
Woolworths opened two Masters stores in its new format during the quarter (New South Wales and Western Australia) and has reported that these stores are providing positive early results. Through new store openings and refurbishments, Woolworths said it planned to have 13 stores (approximately 22 per cent of our network) in the new format by the end of the financial year.
Home Timber and Hardware
Woolworths reported that home timber and hardware sales for the quarter were $238 million, up 22.1 per cent on the previous year (24.0 per cent Easter adjusted), driven by sales from recent store acquisitions as well as enhancements to its trade offer. Excluding the impact of acquisitions, underlying sales were positive.