Woolworths to slash jobs, product ranges in $400m cost-saving drive

Woolworths will shrink its range of products and slash some office jobs to cut costs after a difficult few months drove a $190 million hole in profits, with further losses expected over the coming months.

On Wednesday, the supermarket giant announced a $400 million cost-cutting plan to simplify the company, which was spurned by customers as the consumer watchdog started legal action over price-gouging claims, and a fortnight-long worker strike stripped its shelves bare late last year.

Chief executive Amanda Bardwell declined to say how many workers would lose their jobs or which grocery lines would be discontinued in the savings push after she reported what she called a “difficult and disappointing result” for the latest half.

Bare shelves in a Melbourne Woolworths in late November. The strike has cost the company dearly.

“What we’re talking about here is really a very targeted reduction in some areas where we’ve just seen that customers are not needing and not responding to the number of different [products] that we have in some particular categories,” Bardwell told reporters on Wednesday.

“To be clear, there is no set target on this at all.”

The plan was announced as the company revealed its net profits slumped 20.6 per cent to $739 million and earnings before interest and tax (EBIT) fell 14.2 per cent to $1.45 billion in the six months to January 5, driven largely by lower grocery sales during last year’s 17-day industrial action, which also led to additional supply chain costs to stocking shelves.

While it was still early in the June half, the supermarket giant warned it expects EBIT to suffer a “mid-single digit decline” in the current six-month period. Interest rates have fallen a notch, but customers were continuing to focus on value and affordability, Bardwell said.

The $38 billion supermarket giant has been fighting to restore its standing with customers after accusations of price-gouging in the cost-of-living crisis. Customer ratings for the company had actually been improving towards late 2024 before it was hit by a lawsuit from the Australian Competition and Consumer Commission (ACCC) and the consumer watchdog’s supermarket inquiry interim report released in September.

The strikes then shuttered distribution centres in Victoria and NSW in the run-up to Christmas, which also caused liquor shortages at some stores of its Dan Murphy’s and BWS bottle shops.

Bardwell conceded the supermarket chain could have handled the strike better. “I would have improved our communication to customers during that period as we saw increasing numbers of gaps on-shelf,” she said.

“We’ve certainly taken that as a learning as a team [that] we can and will do better in the future.”

Woolworths chief Amanda Bardwell addresses the company AGM last October.Credit: Louise Kennerley

Australia’s largest grocer is at pains to convey it offers good value as it observes customers increasingly spreading their shopping across multiple stores to find the cheapest options, particularly at Bunnings, Costco and Amazon for non-food items such as personal care, cleaning and pet products.

Bardwell insisted Woolworths hasn’t lost any customer traffic. “Customers are still choosing to shop with us. They’re just not adding as many items as they were previously as they look to cross-shop across a number of different retailers,” she said.

Woolworths is undertaking an assessment of all its divisions, which include the New Zealand business as well as Big W and the recently acquired pets food supplier PETstock. Big W is a poorly performing discount retailer that has consistently lagged the Wesfarmers-owned Kmart, which is driving significant earnings. Big W’s earnings almost halved (down 45.9 per cent) during the half to $29 million as it shuffled its range to lower-priced products, ramped up clearance sales and paid higher wages.

Bardwell is hoping Big W will pick up more customers and sell more items over the coming years. “It is a very competitive sector right now.”

Overall, sales at Australia’s biggest supermarket chain rose 3.7 per cent to $35.9 billion, and online sales increased 18.3 per cent to $4.7 million in the latest half.

Woolworths’ Australian food sales fell 12.8 per cent, which the supermarket claimed would have been only 5 per cent if not for the strike action that resulted in an estimated $240 million in lost sales. Sales in Victoria have not yet fully recovered.

The ASX giant’s share price closed 3 per cent lower on Wednesday. The company’s half-year results missed market expectations, which Jarden analyst Ben GIlbert said had been low to start with. “What will Woolworths do with $400 million of incremental cost-out? Bank or invest?” he asked in a note to clients.

Bardwell is about six months into the top job after Brad Banducci left after eight years at the Woolworths helm, with his retirement announced days after a disastrous ABC Four Corners interview.

Both Banducci and Bardwell appeared at the ACCC’s inquiry hearings, in which Bardwell deferred many times to her predecessor.

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