Food sales at Woolworths’ Australian supermarkets jumped by 5 per cent to $48 billion in the 12 months to June, while sales rose 8 per cent to $4.8 billion at Big W. But the company said trading conditions at the discounter have changed “dramatically” since the December half, with its sales down 6 per cent during the first weeks of the 2024 financial year.
Banducci said “premium” or higher income consumers were moving from specialty retailers to Big W in the face of cost-of-living pressures, but that recent sales trends also revealed that families under increasing financial pressure were spending less on toys and holding back on kitchen appliances such as kettles and microwaves.
“You see the reality of the pressure on customers right now. The good thing is, we don’t think we’re badly positioned in that [environment],” he said. “I don’t think we should sugarcoat it, it’s going to be a challenging time in the sector going through to Christmas.”
Like its ASX-listed rival Coles, Woolworths called out increasing levels of stock loss amid a rise in shoplifting in the face of the cost-of-living crisis.
Chief executive Brad Banducci said theft had spiked in the third quarter, and was “one of the components [of] stock loss, but not the biggest component”. Aggression towards staff members was a bigger concern, he noted, with the company recording more than 3000 acts of violence, threats and abuse over the past year.
Despite supplier cost inflation, the company improved profit margins at its Australian supermarkets, with earnings before interest and tax as a percentage of sales now at 6 per cent, up from 5.3 per cent last year. Banducci attributed the higher profitability to cost cuts during the pandemic, combined with upgrades to the company’s supply chain and analytics platform, which personalises customer offers and helps plan more effective promotions.
“That all comes together in the result we’ve seen, it needs to be seen in that context,” he said on a call with media on Wednesday morning.
He also echoed Coles boss Leah Weckert in confirming that the inflation on food prices has started to moderate, with meat, fruit and vegetable prices dropping, though prices for packaged goods remain elevated.
E&P Financial analyst Philip Kimber said the results in Woolworths’ food business were impressive.
“Sales for the key Australian food business were strong in [the fourth quarter],” coming in ahead of the broker’s predictions, he said.
Woolworths said its investors will receive a final dividend of 58 cents per share, fully franked and payable on September 27, an increase of 9.4 per cent on last year.
