Woolworths refines turnaround strategy

Woolworths pivots from “turnaround to transformation” as revival strategies pay off and sales growth continues.

A buoyant Brand Banducci hails Woolworths’ turnaround. Pic: John Feder

Woolworths chief executive Brad Banducci says the retailer has pivoted from “turnaround to transformation”, as years of hard work cutting costs and listening to customers starts to pay dividends with better performances from its flagship supermarkets arm.

Addressing shareholders at the company’s annual general meeting in Melbourne this morning, Mr Banducci also confirmed that the first quarter positive sales momentum for its supermarket chains, as well as most of its other retail businesses, had continued into November.

But although there were some early signs of a turnaround of its struggling Big W general merchandise retail stores, Woolworths chairman Gordon Cairns said there was still plenty of work ahead to improve its performance.

“Yes, we have faltered here over the last five years,’’ Mr Cairns told shareholders.

“But we are convinced that we have a strong plan in place to regain sales momentum. We are resetting prices to regain price trust, essential in a discount department store. Rather than try and win in all categories, we have narrowed our focus to six ‘universes’ - kids, home, everyday needs, his, her and leisure where we have strong positions.’’

Mr Cairns also told shareholders that Woolworths wasn’t just waiting around for Amazon to set up, as he conceded the threat from the US retail giant.

“They are a formidable competitor,’’ Mr Cairns told shareholders. “We are not waiting for Amazon to come here and then responding, we are getting ourselves to a position to where we can compete effectively.”

Turning to the bulk of the Woolworths business, Mr Banducci said fiscal 2018 sales had remained “solid”.

“I am pleased to report that our sales performance has remained solid so far this financial year. A few weeks ago we reported our sales for the first quarter of the 2018 financial year with good trading momentum and progress against our strategic priorities in all of our businesses,’’ he said.

Last month Woolworths proved it was in the ascendancy in the supermarket wars as it trounced arch rival Coles over the first quarter of 2018, although both chains were dragged lower by food deflation thanks to a bumper fruit and vegetable harvest.

Woolworths revealed growth in food comparable sales of 4.9 per cent for the first quarter, easily eclipsing Coles which, in the previous week, had recorded same store sales growth of just 0.3 per cent.

The first quarter sales growth for Woolworths’ supermarkets division was the best quarterly sales performance in nearly 10 years

All businesses - supermarkets, hotels, Endeavour Drinks and Big W - grew their top line sales.

Big W’s sales growth of 2.9 per cent was its first like-for-like sales growth in a number of quarters.

Mr Banducci said Woolworths would now be refining its strategy, following the resuscitation of the group’s earnings after years of falling profitability and its maiden loss as a publicly-listed company.

“Our priorities for fiscal 2018 remain largely consistent with fiscal 2017, however we have changed the emphasis to reflect our shift in focus from ‘turnaround to transformation’.

“Key to this is our new group purpose. We are focussed on ‘creating better experiences together’ for our customers, our teams and the communities within which we operate.’’

Mr Banducci said in its Australian supermarkets business, Woolworths expects to see continued improvement in fresh food, store format, customer engagement, range and prices.

Endeavour Drinks, which includes the Dan Murphy’s retail chain, would focus on innovation at its physical stores and online with new formats and service propositions such as express delivery.

He said there was “significant opportunity” to improve Big W.