‘They saw us as price-gougers’: Woolworths fights to win back unhappy customers

Woolworths outgoing chief executive Brad Banducci will spend his last weeks in the job on the store floor and as a delivery driver as the supermarket chain fights to convince shoppers it is value for money.

The grocery giant posted a 0.6 per cent fall in earnings before significant items to $1.7 billion, with Banducci claiming the company was blindsided by shifts in consumer habits triggered by the Greens-led Senate inquiry earlier this year and a sudden switch to home brands.

Outgoing Woolworths chief executive Brad Banducci expects the trading environment to remain “challenging”. Credit: Louie Douvis

“The customer changed their attitude [after December] in coming into the store, and all of a sudden they saw us as price-gougers, and therefore there was huge urgency we needed to have to prove that we weren’t,” Banducci said on Wednesday.

“Outside of that, actually, what you started to see was customers looking for more entry-level products, in particular own brand. That’s where we had them on shelf, but they sold out so quickly we ended up out of stock, and that was our availability issue.”

He said that until the beginning of this year, consumers had said they were under financial stress but were “not really acting on it”.

But now, as shoppers increasingly manage their budgets and seek ways to save money on their grocery shop, Woolworths’ private label brand sales rose by 5.1 per cent, with its Macro brand growing 12 per cent compared with the year before.

“The product was there, but it was sold out, and then the customer gets angry with you,” said Banducci. “We just need to do more for the customer on value.”

Overall sales for the group ticked up 3.7 per cent to $67.9 billion for the 12 months to June 30. Food sales rose at the same rate.

Shareholders will receive a special dividend of 40¢ a share, resulting in a total dividend of $1.44 a share for the 2024 financial year.

Prices at the country’s largest supermarket fell 0.2 per cent and 0.6 per cent in the March and June quarter, respectively, marking the first time prices at Woolworths have fallen since the first half of 2022, as the supermarket passed on lower costs to customers, particularly in fruit, vegetables and meat.

Woolworths’ e-commerce sales grew by 20.2 per cent as Aussies increasingly do their grocery shopping online.

The numbers indicate that the grocery giant is on some measures falling behind rival Coles, which on Tuesday revealed net profits lifted 2.1 per cent and e-commerce sales rose 30.1 per cent. Coles has taken steps to expand its home brand ranges to lure customers away from Aldi as the German supermarket’s low prices and exclusive brands become appealing to shoppers looking to save.

The results are Banducci’s last, capping off his eight years at the helm as he prepares to hand over in a few days to Amanda Bardwell, who currently leads the company’s digital unit, WooliesX.

Banducci, who finishes on Friday, said he was compiling a list of items he had wanted to achieve as chief executive but didn’t, which will be presented to his team before he departs.

‘I made some mistakes earlier this year, we can agree, but ... I’ve tried every minute of every day to fix them.’

Outgoing Woolworths CEO Brad Banducci

“I’ll spend the last couple of weeks working in stores, including ... home deliveries,” he said,

“There are many things I would’ve maybe played differently. I made some mistakes earlier this year, we can agree, but … I shouldn’t be judged by not trying to fix them. I’ve tried every minute of every day to fix them.”

Banducci announced his retirement days after attracting criticism for walking out of a Four Corners interview with ABC reporter Angus Grigg while being questioned about market concentration in the supermarket sector. Chairman Scott Perkins dismissed suggestions that the retirement was related to the heightened criticism Banducci was facing.

Looking beyond Woolies’ Australian supermarkets, the company’s New Zealand business is weighing heavily on the balance sheet, with normalised earnings nosediving 57 per cent as high wage increases of 19 per cent over two years outpaced sales growth.

The New Zealand arm’s poor performance has resulted in a $1.5 billion writedown that, taken together with a loss on Woolworths’ investment in bottle shop owner Endeavour Group, pushed profits down more than 90 per cent to $108 million.

Discount retailer Big W is also underperforming, posting a 3.9 per cent slide in sales and a steep 90.3 per cent dive in earnings as higher discounting resulted in lower revenue in its home and clothing categories.

Banducci pointed to the pullback in discretionary spending and customers’ trading down as the factors behind the decline.

The discount department store, which faces stiff competition from its more successful rival Kmart, plans to simplify its range and work harder to lower prices.

Amanda Bardwell will take the reins at Woolworths. Credit: Dominic Lorrimer

While earnings since the start of the new financial year are looking stronger, its profit outlook is “contingent” on the crucial upcoming holiday and Christmas trading period, said Banducci.

Investors appeared to welcome Woolworths’ results, sending its share price 2.8 per cent higher in afternoon trading.

“Woolworths has delivered a strong result from its food division with a combination of good cost control and better gross margins. The special dividend will please shareholders,” said MST Marquee senior research analyst Craig Woolford.

“The prospects for [fiscal 2025] indicate modest growth and the focus will be on the platform that new CEO Amanda Bardwell sets when she commences in the role on September 1, 2024.”

Woolworths’ profits have been down this year.Credit: Oscar Colman

Bardwell told reporters on Wednesday she was excited to begin in the role to “build better customer experiences” and reiterated the focus on providing value to customers.

“That’s about meeting our customers where they are. That’s what’s going to be critical for us in the year ahead.”

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