Steady Quarter for Woolies, All Things Considered

Supermarket giant Woolworths has topped Coles in reporting an 8% rise in March quarter sales after its rival revealed a 6.5% rise of its own in its quarterly update last Friday.

Woolies’ increase – to $16.338 billion – was ahead of the annual inflation rate of 7% in the quarter, while Coles’ growth to a total figure of $9.67 billion trailed the CPI.

Like Coles, Woolies did report a slight moderation in inflation in the quarter and a slowing in the number of requests from suppliers for price rises.

But costs remain a worry for customers, according to Woolies CEO Brad Banducci who told investors in Tuesday’s update:

“Availability scores in our food businesses are improving as supply chains slowly recover, but customers are concerned about the impact of ongoing inflation on household budgets.”

“In general, customer spending is stable. However, value-conscious customers are becoming more thoughtful about their discretionary spend, trading into more affordable options such as our own brands and looking for additional ways to save in store or through our Digital, Rewards and eCommerce platforms,” he added.

Woolies said it Australian food sales rose 7.6% (also topping inflation), with sales in Woolworths Food businesses up 7.4%.

“Woolworths Supermarkets and Metro Food Stores store-originated growth was strong as customers shopped more in store and eCom sales returned to growth after cycling COVID impacts in the prior year.

New Zealand Food’s sales momentum continued to improve in the March quarter with sales increasing by 8.5%, Woolies said in the statement.

“However, item growth was impacted by ongoing supply chain challenges, particularly the impact of Cyclone Gabrielle (in February). Operating conditions in the country remain challenging but have stabilised following weather-related disruption early in the half.”

Sales at its BIG W mid-level department store group rose 5.7% over the three months.

“However, growth rates moderated over the quarter with Apparel sales more challenged from a slow start to seasonal winter sales.

Looking to the final quarter to June, Woolies said that to date “sales trends have been in line with Q3 with solid sales growth in our Food businesses and growth moderating in BIG W.

“Looking ahead, we’re seeing signs of overall inflation moderate in Food. However, in many areas inflation remains frustratingly elevated and we need to continue to work hard to provide our customers with great value across their shopping basket.

“This includes a focus on affordable protein, further leveraging our own and exclusive brands, our seasonal Prices Dropped program and personalised Everyday Rewards member offers.

“Our current focus is on continuing to improve our customer experience, especially value for money and product availability, and we remain cautiously optimistic that Woolworths Group is well placed to navigate and respond to the current trading challenges successfully for all key stakeholders – our customers, our team, our suppliers and community partners, and our shareholders.”

Woolies shares ended Tuesday down 0.8% at $38.58, having been caught up in the sell-off after the RBA’s surprise rate rise yesterday afternoon.

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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