Woolworths’ third quarter results are in and it looks like the grocery giant is lifting its game with a 4.5% increase in food sales to $9.3 billion, comparable to the same time last year, and online sales are up by a sizeable 20%.
The positive results come following a half-year breakthrough event in February this year, when Woolworths overtook archrival Coles in the key financial metrics, which is the first time in over seven years.
Online sales for Woolworths third quarter were up by 20% in its encouraging third quarter results, although Woolworths and the grocery retail sector could see some repercussion with the confirmed arrival of Amazon‘s full-fledged services in Australia, including its grocery arm Amazon Fresh. Rising cost prices could be another the potential depressor to the company’s future bottom line.
Woolworths’ chief executive Brad Banducci says that while the results are pleasing, he warned about the financial impact of rising costs prices this week. “We are pleased with the progress we have made on our key priorities with the strong sales growth in Australian Food during the quarter a particular highlight. However, H2’17 will reflect the financial impact of higher investment in key areas, cost price increases (particularly in meat and produce) and our response to ongoing competition and promotional intensity,” said Banducci.
The overall customer service satisfaction for Woolworths has improved significantly, with a 77 % increase from the last quarter, however the supermarket chain says its biggest opportunities for further improvement is in on-shelf availability and fruit and vegetables. Items-per-basket growth was positive at 4.7%.
The company confirmed average price of grocery commodities declined by 2.5%, including the price of meat, despite the higher input cost prices. In March this year, Banducci warned that the price of meat could go up due to higher energy costs, with fears that he may be forced to pass this onto customers, and ruin its competitiveness with Coles and Aldi.
Woolworths says the pleasing decline in grocery pricing was largely driven by general merchandise and grocery, with fruit and vegetable prices marginally inflationary, while volume growth remained strong.
Woolworths closed three supermarkets and opened two ending this quarter with 978 Australian supermarkets and 23 Metro food stores.
While the grocery game looks positive for Woolworths Group, Banducci warned that BIG W’s takings weren’t as encouraging, with losses expected for HY17.
“BIG W is a work in progress and its turnaround will be a multi-year journey. Due to the investment we are undertaking as part of our revised plan, we currently expect BIG W to report a loss before interest and tax of $115-135 million for H2’17.”