Woolworths results show resurgence

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An emboldened Woolworths has posted an increase in revenue of 4.5 per cent over 2016-17, to total $36.4 billion, as the retailer benefited from a change of direction and refocused food strategy.

The company also posted comparable sales growth of 3.6 per cent over the year, although cost-cutting measures have put pressure on the supermarket division’s profitability over the same period.

Woolworths Group CEO Brad Banducci says Woolworths supermarkets’ sales growth continues to be driven by customer transactions, with an increase in the number of items per basket also assisting in the second half.

“An increased focus on inventory management delivered a 1.8-day reduction in day’s stock on hand, leading to strong cash generation for the year,” he said. “In addition to the improvements in VOC (voice of customer) and VOT, our voice of supplier (VOS) is up 20 points since the initial survey in August 2016.”

In its FoodCo and Metro divisions, Woolworths rebranded, repositioned and reformulated about 3,000 products into Essentials and Woolworths. Six Metro stores were opened during the year and three small supermarkets were rebranded to end the year with 23 stores in the Metro format.

“Metro stores delivered comparable sales growth of 17 per cent during the year as we focused on meeting our in-store customers’ need for increasing convenience,” Mr Banducci said.

The company has also invested heavily in consumer data analytics through its $200 million stake in the Quantium Group. In the fourth quarter, Woolworths brought together its Loyalty and Digital businesses to create a new business called WooliesX.

“WooliesX will allow Woolworths to maximise the combined wealth of insights and technical expertise currently in the group as we look to accelerate our growth from digital over the next three years,” Mr Banducci said. “Online growth in Australian food was 15.8 per cent for the year, and we reached the milestone of 10 million Woolworths Rewards members in the last week of the financial year.”

Mr Banducci says Woolworths is pleased with the progress it made in FY17 and is excited about its ability to improve further its business, customer and team experiences in FY18.

“We’re moving from a turnaround phase, focused on fixing our business foundations, to a transformation phase, focused on leveraging team work, digital and insights to materially improve our business. I would like to thank our entire team for their efforts over the past 12 months and look forward to their support in FY18,” he said.

Woolworths’ resurgence has put pressure on rival Coles over the past year. Wesfarmers’ Coles division posted a revenue decline of 0.1 per cent over 2017-18. Coles’ comparable sales growth is also much lower than 2016-17, at one per cent.

IBISWorld Senior Industry Analyst Nathan Cloutman said: “Rising price competition from Woolworths and the ongoing expansion of ALDI and Costco across the country have put pressure on Coles over the past year, with the company losing market share as a result.”

IBISWorld expects the supermarkets and grocery-stores industry to total $108 billion in 2017-18, with Woolworths estimated to account for 34 per cent, Coles 29 per cent, ALDI 10 per cent, and the rest made up by smaller players such as IGA and Costco.

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