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Woolworths’ turnaround builds sales momentum

Brad-Banducci-WoolworthsCEOWoolworths’ turnaround strategy is building momentum, with the conglomerate reporting its Aussie food sales are up 5.1 per cent to $9.3 billion for the third quarter.

The supermarket giant said transaction growth was the biggest driver of the result with comparable Easter adjusted transaction growth of 4.1 per cent. Comparable items per basket growth remained positive leading to comparable Easter adjusted item growth of 4.7 per cent.

Online sales grew in the quarter by approximately 20 per cent, while three Supermarkets were closed and two opened, ending the quarter with 978 Australian Supermarkets and 23 Metro Food stores.

“We are pleased with the progress we have made on our key priorities with the strong sales growth in Australian food during the quarter a particular highlight,” said Brad Banducci, CEO, Woolworths. “However, H2’17 will reflect the financial impact of higher investment in key areas, cost price increases, particularly in meat and produce, and our response to ongoing competition and promotional intensity”

Endeavour Drinks Group sales increased by 2.3 per cent to $1.9 billion in Q3’17 compared to the prior year with comparable sales increasing by 0.8 per cent. Easter adjusted total sales increased by 3.9 per cent with Easter adjusted comparable sales increasing by 2.2 per cent.

One Dan Murphy’s store opened during the quarter bringing the total to 216. Four BWS stores opened and one closed, ending the quarter at 1,295.

New Zealand Food sales increased 2.1 per cent on the previous year to NZD1.6 billion. Comparable sales increased by 1.9 per cent for the quarter. Easter adjusted sales increased by 2.2 per cent with Easter adjusted comparable sales increasing by 2.1 per cent. In AUD, sales increased by 4.3 per cent due to the strengthening of the NZD against the AUD.

Big W wilts again

Discount department store, Big W sales fell 8.6 per cent in the third quarter with comparable sales declining by 8.2 per cent. On an Easter adjusted basis, total sales declined by 6.1 per cent and comparable sales declined by 5.7 per cent.

Woolies said comparable sales were impacted by apparel clearance activities driving deflation with summer inventory cleared to make way for new season apparel.

After completing a review of the ailing department stores chain, David Walker has been appointed to the position of managing director, Big W after acting in this role since November.

“We are working hard to restore price trust with our customers, the process of which has already begun,” the company said in its trading update. “We have also made a number of other senior appointments to bolster the team with the Big W senior leadership team now largely complete.”

The total number of stores at the end of the quarter remained unchanged at 186.

“Big W is a work in progress and its turnaround will be a multi-year journey,” said Banducci. “Due to the investment we are undertaking as part of our revised plan, we currently expect Big W to report a loss before interest and tax of $115-135 million for H2’17.”

Woolies flagged a less positive result in its second half. “We expect to see further improvements in stockloss in the second half, however, this may be partially offset by the impact of continued input cost price increases, particularly in meat and produce, and our continued response to ongoing competition and promotional intensity.”

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