Solid Q1 as Woolworths doubles online sales

Woolworths has posted an 11.5% lift in first quarter same store sales, fuelled by a doubling of online and strong gains in liquor.

Woolworths employee Sarah Goldsmith. Picture: Keryn Stevens

Woolworths has posted an 11.5 per cent lift in first quarter same store sales, fuelled by a doubling of its online sales as well as strong gains by its liquor arm.

Releasing quarterly sales results on Wednesday, Woolworths said it had experienced a pleasing start to fiscal 2021 with all retail businesses delivering strong sales growth and customer metrics remaining solid.

The retailer said the costs of COVID-19, including the cleaning of its stores, extra hygiene protocols and assigning staff to monitor customer interactions and social distancing had also moderated, hitting $176 million for the first quarter.

Woolworths’ supermarket division’s result confirmed the strength of grocery retailers through the health crisis, with total Australian food sales for the quarter up 12.9 per cent to $12bn with comparable sales increasing 11.5 per cent.

Online was particularly strong, with e-commerce sales up 100 per cent to $961 million and sales penetration in the quarter reaching 8 per cent. Woolworths said sales continued to benefit from higher in-home consumption, driven by COVID, as well as the success of its Ooshies giveaway campaign.

Sales growth in Victoria was approximately 20 per cent in the quarter due to the more stringent restrictions in place. Excluding Victoria, Australian food total sales increased by 10.6 per cent.

Woolworths rival Coles last week posted first-quarter same story sales growth of 9.7 per cent and online sales growth of 57 per cent for the quarter.

The COVID-19 pandemic did have an impact on the number of customer visits to Woolworths supermarkets and small-format metro stores were affected by the exodus of workers from the cities, Woolworths reported.

But this also made neighbourhood stores more popular as consumers shunned crowds.

Woolworths said freestanding and neighbourhood stores continued to outperform, with sales growth in major shopping malls and city locations still feeling the effects of COVID.

As the quarter progressed however, there was some change in this trend.

Woolworths said while first quarter comparable transactions declined 9.3 per cent as customers continued to shop less frequently, they were purchasing more with each shop, with comparable items per basket growth of 15.8 per cent.

The increase in e-commerce penetration also contributed to the growth in items per basket with the trend amplified in Victoria.

Metro food stores sales declined 5.1 per cent to $235m, materially affected by reduced foot traffic across CBD areas and transport hubs, particularly in Victoria. On-The-Go store comparable sales declined by approximately 50 per cent, partly offset by growth in neighbourhood stores.

At its liquor retail arm Endeavour Drinks, like for like sales rocketed by 20 per cent to $2.65bn with total sales growth better by 21.4 per cent. Woolworths said Endeavour Drinks’ sales continue to benefit from in-home consumption with Father’s Day trading performance a highlight.

Spirits was the fastest growing category in Dan Murphy’s and BWS led by the continued popularity of gin. Wine sales remain strong driven by premium wines and strong growth in Pinnacle brands, particularly in Dan Murphy’s. Beer sales benefitted from continued craft beer growth.

Woolworth’s hotels business continued to be affected by shutdowns, social distancing rules and other impediments, with total sales declining by 33.2 per cent to $313 million. Sales growth was broadly consistent over the quarter but slowed marginally in August and September. All categories were below last year as varying state-based COVID restrictions remained in place throughout the quarter, Woolworths said.

At Big W, its general merchandise store that recently turned profitable, total sales in the first quarter increased by 20.4 per cent to $1.115 billion with comparable sales growth of 22.3 per cent. Excluding the 22 stores closed in metropolitan Melbourne during the quarter, comparable sales increased by 28.5 per cent.

Comparable sales growth continued to be driven by an increase in items per basket, with comparable transactions reducing slightly, impacted by Melbourne closures leading to fewer customer transactions but bigger basket sizes. Excluding the closed Melbourne stores, comparable transactions increased by 5.3 per cent. Strong sales growth continued every month in the quarter and across all major categories, with leisure and toys the standout.

Woolworths reported that its digital platforms remained in huge demand during the quarter, as average weekly traffic to Woolworths’ websites and apps continued to increase in the first quarter with 11.4 million visits, up 75.5 per cent on the first quarter of 2020 and 12.7 per cent on the fourth quarter of 2020.

Online sales growth further accelerated in the quarter, Woolworths said, increasing by 100 per cent on the first quarter of last year and materially exceeding fourth quarter growth of 69 per cent. By state, Victorian growth was strongest with COVID restrictions resulting in growth of over 180 per cent for the quarter. Sales in NSW and ACT were also strong with growth slightly lower in SA, WA and QLD.