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Food sales lift Woolies to $1.5 billion profit

Business

Woolworths’ heavy food discounting has paid off with the supermarket giant’s sales growth beating analysts expectations.

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Its crucial like-for-like food sales rose 6.4 per cent in the final three months of its 2017 financial year, beating market expectations of a 5.7 per cent lift.

It is also the third consecutive quarter in which Woolworths’ like-for-like sales growth has outpaced Coles’ – edging up 0.7 per cent in the fourth quarter.

Chief executive Brad Banducci said total food sales increased 4.5 per cent in the year to June 25 with the fourth quarter the strongest at 7.2 per cent.

“Sales growth continues to be driven by customer transactions with an increase in the number of items per basket also assisting in the second half,” he said in a statement today.

However, the group’s underlying net profit of $1.42 billion just missed market consensus of $1.47 billion, due to discount variety store Big W’s hefty losses.

Banducci described Big W’s $150.5 million loss before interest and tax, and its 5.8 per cent fall in sales as “extremely disappointing”.

The group’s $1.53 billion statutory net profit, however, was a sharp bounce back from the previous year’s writedown-heavy $1.23 billion loss.

Food sales growth is not expected to continue at the same rate as in the fourth quarter but, Banducci said, comparable food sales growth in the first eight weeks of the 2018 financial year had been broadly in line with the 2017’s second half.

But the company is not so optimistic for its major discount store.

“We don’t expect an improvement in losses at Big W in FY18,” Banducci said.

“While we expect to see a positive customer response to lower prices, better product solutions and a better customer experience, it is still too soon to tell when this may translate into sales momentum and improved profitability.”

– AAP

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