Woolworths continues sales turnaround

WOOLWORTHS has continued to power ahead of Coles but warned of higher prices to come, particularly in meat and produce.

WOOLWORTHS has continued its turnaround, with the supermarket lifting comparable food sales by 4.5 per cent to $9.3 billion in the third quarter.

It comes after a milestone second-quarter result in February, which saw Woolworths overtake Coles in the key metric for the first time in more than seven years.

Chief executive Brad Banducci said the result was pleasing but has warned of a financial impact for the second half of the financial year due to cost price increases, particularly in meat and produce, higher investment in key areas, ongoing competition and promotional intensity.

Woolworths said overall customer satisfaction had improved and items-per-basket growth remained positive at 4.7 per cent.

Average prices declined by 2.5 per cent during the quarter, compared with 2.6 per cent in the previous quarter, largely driven by declines in general merchandise and grocery which offset higher fruit and vegetable prices.

The supermarket said average meat prices “continued to decline” relative to the same period last year despite higher input costs. Earlier this year, Mr Banducci warned that consumers would soon be paying more for groceries due to higher energy costs, which he described as like “trying to outrun a bear”.

Meanwhile, total sales for the group in the 13 weeks to April 2 were up 4.4 per cent to $13.8 billion, with Mr Banducci warning of more pain to come in Big W.

“Big W is a work in progress and its turnaround will be a multi-year journey,” he said. “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.”

Last week, Wesfarmers’ third-quarter results showed sales at Coles continued to slow in the face of Woolworths aggressive price cuts and Aldi’s expansion. Comparable sales edged just 0.3 per cent higher, compared with 4.9 per cent in the same period last year.

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