Woolworths is back and smashing Coles

Photo: Peter Parks/ AFP/ Getty Images.

Woolworths is back in profit, posting a $1.53 billion full year result, a major turnaround from last year’s $1.23 billion loss, as sales growth surges past competitor Coles.

Australian food sales rose by 4.5% to $36.37 billion over the year with the fourth quarter the strongest at 7.2%. Comparable sales increased by 3.6% for the 12 months. A year ago, sales growth was zero.

At Coles, food and liquor recorded sales growth over the year of 2% with comparable sales growth of 1%.

Woolworths declared a final dividend of 50 cents a share, taking the total payout for the year to 84 cents, a 9.1% increase.

Both Coles and Woolworths are under attack from discount players including the German chain Aldi which had been making inroads into the eastern states market.

Analysts at IBISWorld say the Supermarkets and Grocery Stores industry is expected to total $108 billion this financial year, with Woolworths estimated to account for 34%, Coles 29%, ALDI 10% and the rest made up by smaller players such as IGA and Costco.

Woolworths CEO Brad Banducci says 2017 was a year of rebuilding the foundations of the business.

“We are pleased with our progress over the last 12 months, particularly in the second half.

“Our first priority is to build a customer and store-led culture and team. The key highlight in FY17 was the meaningful improvement in customer and team scores across the Woolworths Group.”

He says BIG W’s loss before interest and tax of $150.5 million is disappointing but also reflects the investment in the second half in a new turnaround plan.

Sales at Big W fell 5.8% to $3.56 billion.

The result from the discount department store chain was the main reason underlying net profit for Woolworths fell 3.6% to $1.42 billion.

Banducci says he doesn’t expect Australian food sales growth to continue at the same rate as achieved the fourth quarter.

Comparable sales growth for the first eight weeks of the new financial year has been broadly in line with the growth rate of the second half of 2017.

The 2017 results at a glance:

Banducci says he’s excited about further improving the business.

“We are moving from a turnaround phase, focused on fixing our business foundations, to a transformation phase, focused on leveraging team work, digital and insights to materially improve our business,” he says.

The sales growth was helped by price cutting.

Average prices at Woolworths fell by 2.1% in 2017. In the fourth quarter, they fell 1.2%.

“Customer price perception is beginning to improve but remains a major opportunity and reflects our focus on improving customers’ trust in our prices through lowering shelf prices, with approximately 3,500 products on our Low Price Always or Price Dropped programs at the end of the year,” says Woolworths.

The sales growth story:

Source: Wooloworths

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