Woolworths reports full-year profit of $1.53 billion

BIG W has posted a massive loss, and Woolworths has warned things aren’t getting better any time soon for the struggling retailer.

Big W has posted a massive loss.

WOOLWORTHS has reported a full-year profit of $1.53 billion, lifting its comparable food sales by 3.6 per cent following nearly $1 billion of investment in lowering grocery prices.

It comes after a $1.23 billion loss in 2016 — its first in 23 years as a public company — off the back of a $2.63 billion writedown related to the failed Masters business.

“FY17 was a year of rebuilding the foundations of our business and we are pleased with our progress over the last 12 months, particularly in the second half,” Woolworths group chief executive Brad Banducci said in a statement.

Big W continues to struggle, however, posting a loss of $150.5 million. Mr Banducci described the result as “extremely disappointing” but said it reflected the investment in the second half of the year in a turnaround plan.

“FY18 will continue to be a year of investment for Big W and we do not expect a reduction in losses as we continue to invest to improve the customer shopping experience, including re-establishing price trust.”

Sales at the department store fell 5.8 per cent on the previous year to $3.6 billion, which Woolworths blamed on a “continued multi-year decline in transaction count” and price deflation driven by clearance and discounting.

“A significant body of work was undertaken to build out a turnaround plan to stabilise and improve the business,” the company said.

“We put the customer back at the heart of Big W by developing a strategy focused on rebuilding customer trust on price and deliver the right product solutions, while enhancing our customers’ shopping experience in-store and online.

“We have started to make a number of changes across the business to rebuild team morale and capability and create a strong platform to re-establish our price credentials.”

Speculation about the future of Big W has swirled for the past year. In November, CEO Sally Macdonald resigned after just 10 months in the role. Her replacement, David Walker, was responsible for tidying up Masters before it was ditched.

In a note on Wednesday, Euromonitor International senior research analyst Hianyang Chan said Big W was struggling to stay afloat in the highly competitive discount department store market.

“Similar to Wesfarmers’ Target, Big W is in a midst of a transformation plan by reviewing its strategy plan and customer value proposition in an attempt to remain competitive,” Mr Chan said.

“Comparable sales remained in decline and the retailer struggled to define itself and has fallen out of favour in recent years. The imminent entry of Amazon into Australia will post further threats to most major retailers and Big W will be no exception.

“It is expected that the parent company will aim to further strategise on how to better retain and expand their consumer base by better omni-channel offering, wider, better priced and a more localised product range, better customer service and most importantly, introducing a flexible, faster and cheaper same-day delivery service.”

Woolworths will pay a final dividend of 50 cents per share, bringing the total dividend for the year to 84 cents, up 9.1 per cent on the prior year.

Rival Coles last week posted its first profit decline since it was acquired by Wesfarmers in 2007, down 13.5 per cent to $1.61 billion, while its comparable sales fell to one per cent.

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