Woolworths reports impressive online growth

Date : 24 February 2021

Nick Miles

Head of Insight - Asia Pacific

Woolworths Group has reported half year sales up 10.6% to AU$35,845m and EBIT up 10.5% to AU$2,092m for the period ending 3 Jaunuary 2021. Strong growth was seen across all businesses, except hotels, with online sales growing across the group by an impressive 78%.

Australian Food sales up 10.6% to AU$23,449m

Strong sales growth was seen through the half, slowing marginally in Q2. LFL sales grew 9.3%, slowing from 11.5% in Q1 to 7.1% in Q2, with customer satisfaction scores remaining strong due to a well-executed Christmas, an engaged team and continued efforts to create COVID-safe shopping experiences. The supermarkets business, and particularly online, grew strongly, while Metro stores continued to suffer due to the reduced footfall in CBD and transit hub locations:

  • Australian supermarket sales AU$20,783m (+7.2%)
  • WooliesX online sales AU$1,807m (+91.8%)
  • Metro stores AU$456m (-6.7%)
  • Other revenue AU$403m (+3.5%)

Online sales penetration hit 7.7%, up from 4.4% a year ago, supported by three new ecommerce fulfillment centres, including the first to feature Takeoff micro-fulfillment technology at Carrum Downs. Online growth slowed to 83.3% and penetration declined marginally in Q2, due to seasonal effects and the easing of COVID-19 restrictions. During the half it opened 13 net new supermarkets and Metro stores and refurbished 35, while six Metro stores remained temporarily closed. 

WooliesX continues to innovate

The digital and media arm of the businesses continued its evolution into a 'customer-centric digital content and media platform'. With traffic to all digital assets up 69.8% in Q2. Some of the latest developments include:

  • Refreshing its digital catalogue and the launch of Fresh Ideas for You to inspire customers with healthy ideas and personalised value
  • Seamless and frictionless shopping experiences through new online search features, improved checkout process, better speed and reliability of the woolworths.com.au website, and increased availability of Home Delivery and Pick up times
  • Everyday Rewards was refreshed and launched in Tasmania (previously excluded due to systems issues). Membership has reached 12.8m (+0.5m in H1), while the app has now been downloaded over 3.9m times. New initiatives like eReceipts and new partnerships with Origin Energy and Bupa are also proving popular
  • Enhancements to the Woolworths app, including aisle navigation, smart shopping lists and Scan & Go integration
  • Further 83 stores started taking online orders, with two new CFCs opening in December at Lidcombe (NSW) and Notting Hill (VIC)
  • Direct to boot (contactless click and collect) now at 627 stores (+377 in H1)

New Zealand Food sales up 4.3% to NZ$3,717m

Growth slowed significantly in Q2, with LFL sales of 0.8% vs. 5.8% in Q1. This was attributed to a combination of lower levels of summer tourism, plus softer fresh sales, with reduced availability of imported lines and price deflation in meat, seafood and other fresh foods. Despite New Zealand being COVID-free for most of the period, fewer trips, larger baskets, elevated online sales and a preference to shop locally remained, perhaps an early indictation of shopping behaviours that will stick around post-pandemic in other markets. Online grew 47.7%, with penetration hitting 11.6% of sales, up from 8.2% last year, but down on Q1 levels as trade started to recallibrate across the market. It launched a third dedicated online fulfillment centre in Wellington, its first Takeoff automated fulfillment unit in Penrose in January, has rolled out Scan & Go pilots to five stores, introduced in-app shopping functionality; and relaunched a simplified and strengthened Onecard loyalty proposition. Countdown refreshed 10 stores in the half, with the network stable at 181 supermarkets.

Endeavour Drinks sales sales up 19.0% to AU$5,683m

Sales continued to fly, with COVID-19 restrictions driving at home consumptions and trading up. An exceptionally strong Christmas period was also recorded, with record breaking weeks for both Dan's and BWS in the build up. Growth did slow in Q2, with LFL sales up 15.5% vs. 20.0% in Q1. Spirits, expecially Gin, ready-to-drink products, premium wine and craft beer all saw good growth, alongside the retailer's exclusive brands. Online sales grew 50.1% to AU$483m and penetration at the end of the half was 8.5% of sales. BWS more than doubled its online sales in H1, it also launched a new direct to boot service, with plans to roll this out to all 222 Drive Thru stores. Dan's also expanded direct to boot, now at 172 stores plus introduced a trial for number recognition Pick Up in Sydney. The My Dan's loyalty scheme continued to grow, now with 5.1m members (+26% YOY). Investment in the network continued with 20 net new stores (15 BWS and 5 Dan's) and 28 refreshed, 27 of these were converting stores into the new BWS format.

H2: declining sales, continued investment and restructuring

The reality is that growth will slow significantly, and most likely go negative, for Woolworths as we head deeper into the year and the retailer cycles some unprecedented trading periods from last year. Sales have started to moderate in Q2 and this trends has continued at the start of Q3. Despite this Woolworths will continue to invest, to ensure that it meet the needs of its customers both today and in the future.

Woolworths Group CEO, Brad Banducci, commented, "We expect sales to decline over the March to June period compared to the prior year in all our businesses, with the exception of Hotels. We will continue to accelerate digital as it becomes an ever increasingly important part of the shopping journey for our customers. We have added significant eCommerce capacity across the Group over the last year which puts us in a strong position to meet our customers’ demands. As growth rates in the second half slow as we cycle peak COVID-demand, we have an opportunity to optimise eCommerce at scale and deliver further efficiency. We haven’t yet seen a material flight to value among our customers but expect value to become more important over the next few years as we emerge from a period of unprecedented stimulus. Finally, we are focused on pursuing a successful separation of Endeavour Group, moving from ownership to partnership, and are currently targeting June for completion."

 

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