Low-priced items at Woolies drives sales
for Easter surged a better-than expected 4.5 per cent for the quarter to March compared to the same period a year earlier, Woolworths said yesterday.
The result was the strongest quarterly sales growth since 2010 and well ahead of the 0.8 per cent delivered by Coles last week.
Woolworths has been giving up profit margins in food – average food prices fell 2.5 per cent for the quarter – to spend on lowering prices, refurbish their stores and improve customer service.
The move to attack Coles on its home turf has seen Woolworths shift the number of goods on to an everyday low price point from 900 to 3200 over the past year.
At the same time it has cut the volume of one-off promotional activity and slimmed down its private label range.
“Customers want predictable prices on very routine items they buy every week and we have been working really hard on that,” chief executive Brad Banducci said.
“The real focus for us is getting trust from consumers. A customer doesn’t feel quite as good when they buy an item on promotion versus an everyday low priced item on a routine product.”
Big W is expected to lose between $115 million to $135 million during the second half of the financial year, compared to earlier guidance of an $88 million.
The chain lost $27.2 million in the six months ending December, putting it on track for a full-year loss of $142.2 million to $162.2 million.
Mr Banducci said more time was needed to turn around Big W. “We have got a very clear plan ...” he said.
Morgan Stanley analyst Tom Kierath said while Woolworths was notching up strong sales growth it was giving up profit to do so.
“Significant investment is driving sales growth, hence margins shouldn’t improve appreciably,” he said in a note to clients.
Woolworths shares closed 1.2 per cent higher at $27.35.