Woolworths to invest $150m in supermarkets

Woolworths Limited’s food and liquor sales have increased 0.4 per cent to $10.7 billion for the third quarter. Following the sales result the supermarket giant has also announced plans to invest a further $150 million in price, customer service and loyalty as part of its long term growth strategy.

Average prices compared to the same quarter for the company last year were down 2.4 per cent, driven predominantly by the company’s investment in grocery prices. Excluding tobacco, average prices were down 3.5 per cent.

Aggressive competitor price activity, particularly in fresh, saw the company increase investment in April with the announcement of a number of store wide price drops with a focus on bakehouse and bread.

New store openings during the quarter included one Woolworths supermarket and a reduction of three Thomas Dux stores bringing the totals to 977 and six respectively.

Woolworths petrol

Petrol sales for the quarter of $1.1 billion were 8.8 per cent below the prior year impacted by a 8.1 per cent reduction in average fuel sell prices to 110.3 cpl.

Comparable sales (dollars) decreased 10.9 per cent (10.8 per cent Easter adjusted) and comparable volumes decreased 3.2 per cent (2.9 per cent Easter adjusted). Premium fuels and diesel continued to show strong growth offset by lower grade fuels and LPG.

Woolworths said comparable volumes were impacted by a significant number of competitor canopy openings despite competitive pricing.

Merchandise sales slowed with sales growth of 3.6 per cent and comparable merchandise sales of 1.1 per cent as we cycled strong promotional activity in the prior year. Woolworths opened two petrol canopies during the quarter bringing the total to 523.

Five year growth strategy

Under new group CEO, Brad Banducci, Woolworths is undertaking a review of all aspects of its business. Having taken the first steps towards a new operating model, Woolworths is in the first year of an expected three to five year strategy to restore sales momentum and improve customer loyalty. Faced with continued competitive market conditions Woolworths expect to invests a further $150 million, predominantly in price, customer service and loyalty.

Mr Banducci said: “Getting our customers to put us first is our priority and good progress has been made on delivering better prices and improved service to our customers. We are also embedding a customer and store team culture across our group.

“The sales performance in Australian supermarkets continues to be impacted by high levels of deflation, predominantly from our price investment. However, we are encouraged that customers are starting to notice the improvements we are making. It will be a three to five year journey to rebuild Woolworths Supermarkets, but we are confident we are on the right track.”

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