Bags ban weighs on Woolworths sales

Woolworths’ 1.9pc lift in first quarter food sales reflects a “challenging” period after the end of single-use plastic bags.

The removal of single-use plastic bags has proved painful for Woolworths. Pic: AAP

Woolworths has booked a 1.9 per cent lift in first quarter sales for its Australian food business to $9.9bn, reflecting a challenging start to the year as customers adjusted to the removal of single-use plastic bags.

Woolworths CEO Brad Banducci today blamed rival Coles’ Little Shop promotion and the plastic bags issue for the lowest comparative food sales in eight quarters.

However, by 11.30am (AEDT), Woolworths shares has risen 1.37 per cent to $28.82.

“While it was a more challenging quarter for sales, customer and brand metrics were strong across the group, especially in Australian food, reflecting the underlying health of our business,” Mr Banducci said.

It comes after Woolworths said in August it had been taken by surprise by the negative reaction from shoppers after single-use plastic bags were removed in July.

Woolworths (WOW) today said sales momentum had improved in September through to October, and that the majority of Woolworths’ customers had responded well to the company’s commitment to the environment.

Customer and brand metrics remained strong, Woolworths said.

The supermarket booked a 1.8 per cent increase in the closely watched like-for-like sales metric.

Woolworths’ first quarter comparative food sales were the worst since the first quarter of 2017 when it had 0.7 per cent like-for-like sales growth.

Mr Banducci said Coles’ decision to continue to offer single-use plastic bags as Woolworths removed its bags had affected its sales momentum.

However he said customers had responded well to the decision, and to the firm’s “unwavering” commitment to the environment, with Woolworths investing in extra staff hours to help checkout queues move faster.

The gap between Woolworths and Coles’ strong sales growth is now 3.3 per cent and comes as Wesfarmers prepares the $20 billion demerger of Coles next month. Coles’ growth should help sell the demerger to investors, as new Coles boss Steven Cain spruiks the performance of the supermarket business to shareholders.

Coles surprised the market with a stronger-than-expected 5.1 per cent sales jump for the first quarter. It marked the biggest underperformance for Woolworths against Coles in nine quarters. In the fourth quarter of 2016 Coles reported 2.9 per cent sales growth and Woolworths had -1.1 per cent - for a gap of 4 per cent.

Turning to its online operations, WooliesX, Mr Banducci said online sales increased 26 per cent.

Endeavour Drinks sales grew 3 per cent to $2.1bn for the period while comparable sales grew 1.7 per cent.

The company’s New Zealand food business grew 2.6 per cent to $1.7bn and comparable sales grew 4 per cent for the first quarter.

Big W sales grew 1.3 per cent with comparable sales up 2.2 per cent, driven by strong kids and leisure sales and despite a slow start to sales of summer lines.

“Big W continues to make progress in its turnaround with improved customer metrics and comparable sales growth in the quarter,” the company said.

“All the key customer metrics measured by Big W improved or were stable in the quarter.”

The company said online sales across the group increased 28 per cent for the quarter.

“All businesses are now focused on delivering an exceptional Christmas experience for our customers,” Mr Banducci said.