Woolworths is back in the green with the company reporting a promising net profit for the first half at $725.3 million, compared to a loss of $972.7 million last year this time. Heavy discounting has proven to win shoppers back.
This morning Woolworths Group released its half year profit and dividends for the six month period to December 2016. After cutting costs, offloading assets, slashing prices and supporting CEO Brad Banducci’s turnaround plan, the company has bounced back from massive losses and write-downs in the previous year, which was largely driven by its failed Masters hardware chain.
Heavy discounting has proven to lure its shoppers back, with Woolworths’ food sales growing 1.9 percent in the six months to January 2017. Last year the Group invested over $1 billion into slashing its food prices following acknowledgement that in the previous year the company put profit margins ahead of sales.
Banducci says the company has recently seen a rise in customer transactions as well as increase in number of items per basket. Its brands Endeavour Drinks Group, which includes Dan Murphy’s, BWS, Cellermasters and Langtons; New Zealand Food Group and ALH Hotel all delivered strong growth in the second quarter for Woolworths Group.
“We’ve made good progress on our five key group priorities during the half… Sales momentum improved over the half for Australian Food with comparable sales in December the strongest for the year driven by strong comparable transaction growth and an improvement in items per basket,” says Banducci
While the company has returned to profitability of $725 million, its earnings fell short of market estimates, which was projected to be $819 million for the term, with Big W highlighted as consistent pain point for the retailer, and a work-in-progress.
The company says despite its pleasing half year results, it still has work to do, including reviewing Big W’s strategy which will be completed in the next few months, improving its end-to-end “ways of working” when it comes to productivity improvements and building and improving on its team and supplier engagement.
“While we expect trading conditions to remain competitive for the remainder of FY17, we are focused on building the sales momentum we have achieved over the last six months as we work to restore sustainable growth in Australian Food. We note, however, that the second half will also be a period of continued investment in improving the store experience, depreciation from our renewal and IT investments and higher team incentive payments,” added Banducci.
Woolworths also highlighted that it made progress on its team front with pleasing Voice of Team (VOT) scores, as well as Voice of Customer (VOC) scores.
“A further highlight was the progress we have made on our team front, with a 35%* improvement in keeping our team safe, pleasing improvements in Voice of Team scores, especially ‘would you recommend Woolworths as a place to shop’ and material progress in addressing the gender pay gap.”
Earlier this month Woolworths Group launched its new Corporate Responsibility Strategy 2020, which identifies 20 corporate responsibility and sustainability goals, including gender equality, no salary wage gap, embracing diversity and working towards zero food waste going to landfill.
“We are passionate about the opportunity we have to do the right thing. Every Woolworths team member knows that they have a role to play in achieving these commitments,” says Banducci.