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Woolies loses more ground to Coles and Aldi

Business

Woolworths’ hefty investment in lowering grocery prices has failed to show any sign business is turning around.

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The retailer’s food and liquor sales declined 0.9 per cent in the third quarter when the figures are adjusted for Easter.

The decline shows Woolworths continues to leak market share to archrival Coles and German discount retailer Aldi, despite investing more than $400 million in lowering grocery prices since the second half of fiscal 2015.

Non-adjusted Australian food and liquor sales edged 0.4 per cent higher to $10.7 billion.

Woolworths says it will throw a further $150 million into lowering grocery prices to combat competitive market conditions.

“We are undertaking significant cost reductions to improve base profitability whilst restructuring the business to build up our direct sourcing and design capabilities to ensure that our new range resonate with our customers,” a Woolworths’ statement issued to the ASX today said.

The 0.9 per cent comparable sales decline contrasts with the 0.2 per cent increase in comparable sales during the same quarter a year ago.

It is also worse than the 0.6 per cent comparable sales decline recorded in the second quarter but slightly better than the first quarter’s one per cent fall.

Woolworths’ discount department store Big W also continues to struggle with the group expecting its general merchandise business to book a small loss in fiscal 2016 as it aggressively marks down excessive summer and winter stock.

Newly installed group chief executive Brad Banducci is reviewing the company’s general merchandise operations.

Woolworths’ failed home improvement business, which it is gradually exiting, reported a 11.4 per cent increase in total sales to $507 million, unadjusted.

Masters sales were up 28.8 per cent on a comparable adjusted basis, to $282 million, while Home Timber and Hardware sales totalled $225 million, down 3.8 per cent on an adjusted basis.

Woolworths is still yet to agree on a price to buy out joint venture partner Lowe’s Companies stake in the loss-making DIY chain Masters.

AAP

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