Woolworths catching up to Coles

WOOLWORTHS’ turnaround plan is beginning to show results. The supermarket says its customer satisfaction scores have “improved significantly”.

Woolworths latest sales figures have beat analysts’ expectations.

WOOLWORTHS’ turnaround plan is beginning to show results, with the supermarket closing the gap with Coles in the first three months of the financial year.

In its first-quarter sales update on Friday, Woolworths revealed comparable sales growth of 0.7 per cent, beating analysts’ expectations, after posting falling sales figures of 1.1 per cent and 0.9 per cent in the previous two quarters. Total food sales were up 1.7 per cent to $9.32 billion.

It marks the 29th consecutive quarter the nation’s biggest supermarket has been beaten in the key metric by Coles, which on Wednesday reported comparable sales growth of 1.8 per cent — its slowest growth since 2009.

That represented a sharp slowdown in sales growth from 2.8 per cent and 4.9 per cent in the previous two quarters, although Coles managing director John Durkan described the result as “satisfactory”.

Woolworths chief executive Brad Banducci said the company had made good progress on its five key priorities during the quarter and was seeing “far more consistency in our trading performance in Australian food”.

“Customers continue to respond to the improvements we are making, with Australian food delivering its first positive comparable sales growth since Q2 2015, despite ongoing material price deflation,” he said.

“While we are pleased with our progress, there remains much more to do. Our trading performance over the key Christmas trading period is crucial to the financial performance of the Woolworths Group in FY17.”

Woolworths says its five key priorities are improving customer, team and supplier survey scores, growing food transactions, relaunching Woolworths Rewards, boosting liquor sales and a multi-year turnaround of Big W.

“Our Voice of the Customer scores improved significantly over the same quarter in the prior year and have maintained the levels achieved in Q4 2016,” Woolworths said in a statement.

“Overall customer satisfaction increased to 76 per cent (Q4 2016: 75 per cent) in the quarter and store controllable VOC has increased to 79 per cent (Q4 2016: 77 per cent).”

Average prices at Woolworths declined 1.9 per cent in the quarter, compared with 1 per cent price deflation at Coles in the same period.

Woolworths said the decline was driven by “material price reductions in grocery and bakery” compared to the same quarter last year. Overall fruit and vegetable prices continued to come down albeit at a much slower pace compared to the previous quarter.

The supermarket says it continues to absorb “significant cost price inflation” in its meat business, keeping prices low relative to Coles. Analysts have noted keeping meat prices low has been a key strategy for Woolworths to grow larger basket size.

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