The head of supermarket giant Woolworths has admitted the return to pre-COVID shopping habits may be disproportionately benefiting rival Coles as his company gave a weaker-than-expected trading update.
The company said on Thursday comparable sales at its supermarkets division fell 2.1 per cent to $11.1 billion in the March quarter with its performance being compared against the panic buying boom of March 2020. This marked a bigger drop than the 1 per cent fall analysts had been forecasting.
Woolworth’s chief executive Brad Banducci has admitted normalising shopping patterns are benefitting rival Coles.Credit: Rhett Wyman
Chief executive Brad Banducci said trading for the first three weeks of the fourth quarter had been largely flat on last year, a stark contrast to Coles, which on Wednesday reported a 4 per cent rise in its sales for the start of April.
Analysts had been predicting that Coles had been losing market share to its major rival, but these latest results suggest the tables may have started to turn. Mr Banducci acknowledged that the normalisation of shopping habits post-COVID were likely favouring Coles with its higher number of inner-city and shopping-centre-situated stores, which had been harder hit during the lockdowns.
“We are seeing that playing out. We don’t think it penalises us, but it doesn’t unduly benefit us,” he said. “I think it’s good for the longer term, we do want to get back to more normalised, predictable shopping patterns for our customers.”
Both Mr Banducci and Coles chief Steven Cain, who presented his company’s third-quarter results earlier this week, talked about a return to normal for shoppers, with customers purchasing fewer items and less on bulk, buying more on weekends and shopping at CBD stores as people return to the office.
This is good news for Coles, which has more stores in shopping centres and city centres than Woolworths, and saw its shares rise as much as 4.7 per cent on Thursday.
Shares in Woolworths, however, tumbled by 3.8 per cent to $39.81. Milford Asset Management portfolio manager Greg Cassidy said overall Woolworths’ performance was strong, but the gap between it and Coles appeared to be narrowing.
Mr Cassidy said it was important to note that Coles’ outlook included the bumper Easter period where Woolworths’ did not, however, the fund manager said it did appear Coles’ was gaining market share, though not necessarily from Woolworths.
“The message that Coles was trying to send yesterday is that it is normalising,” he said. “But that’s not necessarily at the expense of Woolworths. Perhaps it’s more at the expense of independents.”
Woolworths’ weaker supermarket sales were offset by a revenue jump at department store Big W, which grew comparable sales by 20 per cent over the quarter to over $1 billion.
Much of this growth was due to stronger apparel sales, Mr Banducci said, along with five years of “very hard” work done by Woolworths to turn the struggling department store around. Last year, Big W reported a profit for the first time in four years.
Online sales also continued to rise, surging a massive 64 per cent to $1.3 billion across the group. Digital orders now comprise nearly 8 per cent of the company’s total supermarket sales.
In this channel, Woolworths appears to be comfortably outperforming Coles, which reported only 49 per cent growth for the quarter, comprising 5.5 per cent of total sales.
Sales at Woolworths’ Endeavour Drinks division rose 5.5 per cent to $2.4 billion for the quarter. The growth at bottle shops and Big W was enough to offset the drop in supermarkets, with Woolworths’ overall sales for the quarter up 0.4 per cent at $16.56 billion.
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