Woolworths chief government Brad Banducci says the turnaround at Australia’s largest retailer will proceed as lengthy as it retains investing and assembly the wants of consumers.
Woolworths has delivered seven consecutive quarters of same-store grocery store sales progress – growing faster than Coles and the broader marketplace for six quarters – however the sustainability of its turnaround shall be examined within the June quarter when it cycles 6.4 per cent positive factors.
“I think we’ll continue to perform in line with where we aspire as long as we continue to put our customers first and meet their needs and do a good job of that process,” Mr Banducci informed The Australian Financial Review on Wednesday.
“We’ve also delivered seven quarters of increases in customer satisfaction … it’s all about customer satisfaction and that is the driver of our performance.”
Analysts anticipate Woolworths’ same-store grocery store sales progress to sluggish to round 2.three per cent within the June quarter from an Easter-adjusted 4 per cent within the March quarter and 5 per cent within the December quarter.
However, they are saying there are not any indicators that Woolworths is dropping momentum in supermarkets, which account for nearly 70 per cent of group earnings.
“Good businesses with momentum are very difficult to slow and it’s hard to regain momentum if you don’t have it,” stated JPMorgan analyst Shaun Cousins.
“Woolworths clearly has momentum in food. They’re investing in on-line, they’re investing in a brand new DC – it’s extremely pleasing an organization with momentum is utilizing it somewhat than maximising short-term returns.
“They’re beginning to cycle robust numbers however they will have additional initiatives to assist them out,” he said. “They’re not simply resting on their laurels, they’re partaking in actions to assist maintain or elongate the turnaround.”
Mr Banducci has flagged extra funding in store refurbishments and upgrades, distribution, IT, employees and on-line and digital initiatives to maintain present clients coming again and to lure new clients – notably big-basket household buyers and premium consumers – into shops.
“Our customers are continuing to notice the improvements we are making,” he stated.
Customer satisfaction as measured by Woolworths’ Voice of the Customer scorecard reached 81 per cent within the March quarter, in step with pre-Christmas highs and up from 75 per cent a yr in the past.
Mr Banducci additionally expects to finish the rollout of Woolworths’ 1Store cloud-based IT improve, which incorporates new point-of-sale, stock and ticketing techniques, by the top of June, saying it might assist the retailer drive sales and scale back prices.
‘Competitive however rational’ market
Woolworths continues to scale back costs, with common costs falling 1.three per cent within the March quarter, in contrast with deflation of two.5 per cent a yr in the past, however its focus has shifted to decreasing every single day shelf costs somewhat than high-low promotions.
Mr Banducci described the market as “competitive but rational,” citing current worth rises for barbecue chickens and personal label bread, which have been being bought at zero margin.
“I can not inform you what lies forward – we’re seeing a really aggressive market setting however one which’s additionally comparatively rational,” he said. “We [Woolworths and Coles] each proceed to work very exhausting to ship worth for patrons, I do not assume that may change going ahead.”
Woolworths shares reached a three-year excessive of $28.18 earlier than closing up zero.9 per cent at $27.99.
Citigroup analysts say Woolworths is executing higher than Coles and anticipate Woolworths’ same-store sales to stay above Coles by way of to the top of 2019.
“Woolworths superior execution on promotions, on-shelf availability and refurbishment activity are key drivers of better sales growth,” Citigroup stated.
Deutsche Bank analyst Michael Simotas agrees, saying on Wednesday: “We remain positive on Woolworths and expect sales outperformance to translate to margin expansion.”
Woolworths’ different divisions carried out properly except Big W, which is within the midst of its third turnaround plan in 5 years.
Same-store sales rose three.three per cent, however after adjusting for Easter and the varsity holidays comps have been down 1.2 per cent as costs fell about three.eight per cent. This adopted zero.1 per cent progress within the December quarter and a 2.9 per cent rise within the September quarter.
The early Easter additionally buoyed Woolworths’ Endeavour Drinks unit. Total sales at Dan Murphy’s and BWS liquor shops rose 6.9 per cent to $2.zero billion and same-store sales rose 6.1 per cent, however after adjusting for Easter comps have been up three.three per cent, falling barely in need of forecasts round 4.1 per cent.
In New Zealand, same-store grocery store sales rose three.eight per cent (Easter adjusted) and complete sales rose three.4 per cent to $NZ1.63 billion as the chain decreased costs to realize market share.
In Woolworths’ ALH motels and gaming enterprise, which has come beneath scrutiny due to questionable practices to develop pokie machine revenues, comparable store sales rose 3.9 per cent and total sales by 3.3 per cent to $390 million.
Mr Banducci stated current allegations are nonetheless being investigated beneath the supervision of an ALH board sub-committee comprised of non-executive administrators, with the help of exterior advisers. ALH has additionally engaged Responsible Gaming Council of Canada to undertake a best follow evaluation and benchmarking challenge in relation to ALH accountable gaming practices.