Woolies putting customers before investors to win the war with Coles

WOOLWORTHS chief Brad Banducci has defended sacrificing shareholder returns to cut prices and generate sales growth, saying what is good for customers will ultimately be good for investors.

The head of the nation’s biggest supermarket chain has also indicated the bulk of its investment in price has been made, saying the prime focus will now be on improving cus- tomer service and stock availability and localising store ranges.

“We believe we have a good long-term plan and we are asking shareholders to give us time to execute it,” Mr Banducci said. “We really believe that if we do the right thing for our customers ultimately we will end up doing the right thing for our shareholders.”

The comments came as Woolworths scored a key victory in the supermarket wars, posting higher sales growth than arch rival Coles for the first time in more than seven years.

The like-for-like food sales, which strip out the impact of supermarkets opening or closing, rose 3.1 per cent for the three months ending January 1, Woolworths said. The result easily beat Coles which last week posted 1 per cent sales growth for the quarter.

Woolworths secured the win by giving up profit in its core supermarket division and cutting its interim dividend to a decade low to invest in moving more goods on to an everyday low price position.

Profit at the retail group, which owns Dan Murphy’s, Big W and a 323-strong hotels group, came in at $725.3 million for the six months ending January 1.

The result is a turnaround from a $927.7 million loss posted a year earlier when Woolworths was hit with major writedowns linked to its now abandoned Masters hardware.

Group sales rose 2.6 per cent to $29.1 billion but net profit from continuing operations slid 16.7 per cent to $785.7 million.

Earnings from Woolworths’ Australian supermarkets fell 14 per cent from to $811.6 million while Big W plunged into the red with a $27.2 million loss.

Woolworths invested $300 million in lowering grocery prices during the half, taking its total spend to $1 billion over the past 18 months.

It has also reintroduced performance bonuses for store managers – spending $110 million on the measure during the half – and upped its spend on training.

Mr Banducci said any price challenge from Coles would be met, and Woolworths was now more than competitive on that front. More effort needed to be spent on communicating its value proposition as well as making sure shelves were always full, he said.

Shares in Woolworths closed 4.4 per cent higher at $26.63.