Woolworths has released its full year results ending 24 June 2018, with sales up 3.4% to AU$56,726m and EBIT up 9.5% to AU$2,548m.
Australian Food sales up 4.3% to AU$37,379m
Like-for-like (LFL) sales grew 4.3% during the year as customer satisfaction scores continued to improve across areas such as fruit and vegetables and availability. However, LFL sales did slow in Q4, growing just 3.1%. The slowdown was not helped by the cycling of a strong trading period last year, but also price deflation of 2.3% (average prices declined 1.9% for the year). Woolworths continued to invest in EDLP during the year, with 4,800 (+1,500) products now in either its Prices Dropped or Low Prices Always campaigns. Metro stores were pulled out as a highlight, with double-digit sales growth and six new stores, resulting in 33 stores now trading under the banner. During year Woolworths opened 11 new supermarkets and closed seven stores, plus refurbished 69 stores.
Building digital and data capabilities via WooliesX
Woolworths online sales now exceed 3% of Australian food sales, growing by over 30% and reaching AU$1.1bn. Sales benefited from Pick Up being extended to over 1,000 locations, with Pick Up sales growing 119% and accounting for approximately 25% of online sales. Aside from online, the retailer's investment in WooliesX has led to an increase in Woolworths Rewards members to 10.9m, as well as improvements to infrastructure that has improved the overall digital customer experience.
Endeavour Drinks sales up 4.5% to AU$8,271m
LFL sales grew 3.6%, with both BWS and Dan Murphy's performing well. Dan's sales benefited from double-digit sales growth online, aided by a new website launch in H2, plus an enhanced premium wine range through a deeper partnership with the Langton wine broking business and eight new stores. BWS sales were boosted by better range segmentation, 18 net new store openings, a successful trial of a store renewal programme, plus the acquisition of third party delivery business Jimmy Brings in December 2017, aiding the roll out of express delivery from stores.
New Zealand Food sales up 3.4% to NZ$6,396m
LFL sales saw the strongest growth for seven years, up 3.4%. However, while LFL sales showed improved momentum in H2, total sales grew just 2.5% in Q4, due to a combination of the planned closure of three Countdown stores and accelerated price deflation. Countdown continued to invest in store team hours, better fruit and vegetables, digital initiatives and lower prices, with 4,500 items now in its Price Down campaign. Double-digit online growth accelerated during the year due to increased capacity, lower delivery fees and free Pick Up on orders over NZ$50. It also launched CountdownX to further enhance online and data capability.
Petrol future remains uncertain
With the acquisition of its petrol business by BP having been blocked by the ACCC, Woolworths terminated its agreement in June 2018. In July, Woolworths agreed a long-term alliance with Caltex across convenience, wholesale food, redemption and loyalty, which will see its four cents per litre fuel discount extended to 125 new Caltex sites, plus customers able to earn Woolworths Rewards points at over 700 Caltex forecourts. Despite this new development, the retailer continues to purse an IPO or sale of the business, with operations still treated as discontinued.
Q1 will give an indication for 2019 performance
Woolworths management say that the business transformation is on track and there remains headroom for improvement, however slowing sales that co-inside with a resurgent Coles, could indicate the momentum is shifting once again. Brad Banducci, Woolworths Group CEO, commented, “In summary, we are pleased with the progress we have made in FY18 and remain energised by the material opportunities we have to create a better business for our customers, team members and shareholders in the future. In Australian Food, sales in the first quarter slowed with comparable sales for the first seven weeks of Q1’19 increasing by 1.3%. Sales have been impacted by customers adjusting to the phasing-out of single-use plastic bags, a competitor continuity program, meat and fruit and vegetable deflation, and the cycling of our successful Earn and Learn program in the prior year. We expect sales momentum to improve over the course of the half."