Woolworths posts strong H1 results

Date : 23 February 2018

Woolworths has reported H1 sales up 3.8% to AU$29,807m and earnings before interest and tax (EBIT) up 9.9% to AU$1,430m.

Australian Food sales up 4.9% to AU$19,339m

Woolwoths' Australian Food business has benefited significantly from the retailer's stronger focus on the customer in H1, with its Voice of the Customer (VOC) scores showing overall satisfaction reaching 82%, compared to 78% for the same period last year. Like-for-like (LFL) sales grew 4.9% in the half despite the retailer's investment in lowering prices resulting in 2.0% price deflation, with 4,200 items now included in its Low Price Always or Prices Dropped campaigns. In-store improvements also continued at pace with 37 renewals and 35 upgrades during the half, as well as its latest flagship concept being launched at Marrickville in Sydney a few weeks ago. During the half 10 net new stores opened, including one Metro.

Online food sales up almost 30%

Huge sales growth in online grocery has been driven by a number of factors, not least the creation of WooliesX in June, which is tasked with investing in digital and data to drive an enhanced and seamless expereince. Pick up services have been rolled out to over 1,000 food sites in H1, improvements have been made to the speed and expereince on woolworths.com.au, plus second and third online customer fullfillment centres have opened in Brookvale, Sydney and West Footscray, Melbourne. The retailer will further look at accelerate this area in H2.  

Endeavour Drinks sales up 4.8% to AU$4,529m

Strong growth at Dan Murphy's and BWS, particularly those attached to supermarkets, helped drive performance. Dan Murphy's growth was aided by six net new store openings and double digit sales growth online. While the banner opened its first drive through pick-up store for online purchases and its loyalty scheme reached 2.8m members. BWS performance benefited from a brand refresh, strong Woolworths Rewards participation, refined ranging and saw 17 net new store openings. The banner now also offers express and scheduled delivery services at over 300 stores.  

New Zealand Food sales up 3.6% to NZ$3,317m

LFL sales in New Zealand grew 3.0%, with an acceleration during the period into Q2. Investment in lower prices and seasonal promotional activity saw average prices decline 0.1%, but sales were boosted by improved availability, increased in-store staffing hours and enhanced fresh and local ranging. Online sales also accelerated in New Zealand, attributed to the launch of free pick up for orders over NZ$50, reduced delivery fees and expanded capacity. Countdown store numbers remained flat, while two new franchise stores were added to the network.

Outlook for H2 looks positive

Woolworths has delivered an impressive turnaround in its performance in the past 12 months, with significant momentum over Coles. The speed at which it has rolled out improvements to stores, plus invested in online has been remarkable and with more to do, Woolworths is looking to establish itself as a true market leader. Across the broader portfolio challenges do remain, Big W growth remains subdued (1.1% in H1) and the retailer also needs to resolve what to do with its Petrol business, with operations still treated as discontinued, but the ACCC recently blocking the sale to BP.

Brad Banducci, Woolworths Group CEO, said: “At the end of FY17, we said that we were moving from turnaround to transformation. In the current half we have seen some early signs of this transformation with good progress on a number of strategic initiatives and pleasing sales growth from all of our businesses. We remain committed to our focus on building a customer and store-led culture and team with a highlight in the half being the continued improvement in customer, team and supplier advocacy scores across the Woolworths Group."