It’s tough but there is ‘space for Big W’
WOOLWORTHS chief Brad Banducci says there is space for its struggling discount chain Big W within the increasingly competitive value end of the retail market.
Woolworths yesterday warned investors to brace for another year of ugly losses at Big W, which it admits has not been competing on price and is running a network of stores that are “dated and tired”.
Losses at Big W came in at a bigger than expected $150.5 million for the year ending June, Woolworths reported yesterday.
The result was a blow out from a $14.9 million dip into the red posted a year earlier and Woolworths warned it did “not expect a reduction in losses” during the 2018 financial year.
The downturn at Big W took shine off a full-year profit report which showed Woolworths’ core supermarket business is reaping the rewards of $1 billion spent on lowering prices and improving service over the past 18 months.
Some retail analysts have questioned whether there is room for Big W, Target and Kmart within the discount end of the local retail market, which is about to be targeted by US online giant Amazon.
Wesfarmers last week reported Target is improving but still loss-making while Kmart continues to deliver doubledigit earnings growth.
Mr Banducci said the degree of overlap between Big W, Kmart and Target was not as big as some may think and Big W could carve out success.
“There is growth in value retailing,” he said.
“The question is, are you being clear on your proposition to get your share of it?”
Woolworths posted a fullyear net profit of $1.53 billion, a turnaround from a $1.23 billion loss in the prior year when the bottom line was hit by writedowns linked to its failed Masters hardware experiment.
Sales at its core supermarkets rose 4.5 per cent to $36.4 billion for the year ending June but profits slipped 2.4 per cent to $1.6 billion as Woolworths invested in lowering prices and improving service.
Profit growth returned in the second half of the year and the closely watched like-forlike sales metric, which strips out the impact of stores opening and closing, hit 6.4 per cent in the three months to June.
The result easily beat key rival Coles but Woolworths cautioned it did not expect that rate of growth to continue.
Big W’s new managing director David Walker said the Coca-Cola Amatil managing director Alison Watkins talks up the company’s new No Sugar drink. chain had not been “on the money” when it comes to price.
“That’s the major driver behind the consistent decline in transactions at our business,” he told analysts.
Mr Walker said Big W has cut the prices of more than 2000 items by about 20 per cent and was building a business around the themes of kids, home, everyday, him, her and leisure.