Woolworths has flagged higher costs for labour, fruit and vegetables and a wider loss for its troubled discount department store Big W this half, as it blitzed supermarket rival Coles with the strongest quarterly sales growth in years.
The country’s biggest supermarket chain said Australian food sales at its 1000-odd supermarkets grew 5.1 per cent in the third quarter to $9.28 billion, or 5.6 per cent adjusting for the timing of Easter.
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The fresh produce sections of Coles, Woolworths and Aldi supermarkets aren’t short on plastic packaging.
Including Easter, like-for-like sales (which excludes new stores) grew 4.5 per cent.
The like-for-like sales growth beat forecasts by investment bank Deutsche Bank, of 3.2 per cent, and outperformed the 0.8 per cent Easter-adjusted quarterly growth recently reported by Coles.
Woolworths chief executive Brad Banducci said Woolworths was “still in the very early stages” of its turnaround but its supermarket growth was a “particular highlight”.
Woolworths has invested more than $1 billion on cutting prices and improving its stores and said customers had been buying more often, with more in their basket. Coles has also invested record amounts in cutting prices in recent quarters.
Prices at the checkout fell for a second consecutive quarter by about 2.5 per cent, Woolworths said, thanks to price falls in grocery and general merchandise and Woolworths absorbing higher costs for meat. Fruit and vegetable prices rose at the checkout in the quarter and are expected to rise further due to the recent cyclone in Queensland and surging electricity costs.
But Mr Banducci flagged rising company costs in the second half as Woolworths continues to cut prices at its supermarkets, as well as continuing problems at Big W, which reported a 6.1 per cent fall in total sales to $757 million across its 186 stores.
Woolworths said total group sales were up 4.4 per cent to $13.8 billion in the 13 weeks to April 2. Photo: Glenn Hunt
” … the second half of 2017 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,” he said.
“Big W is a work in progress and its turnaround will be a multi-year journey. 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 between $115 million and $135 million in the second half of 2017.”
Total group sales were up 4.4 per cent to $13.8 billion in the 13 weeks to April 2, or 4.4 per cent adjusting for Easter.