Woolworths Group says local inflationary impacts are creating new challenges as its customers’ household budgets become increasingly stretched.
Woolworths Group has announced a 5.7 per cent revenue increase to $ 64.3 billion with a 4.6 profitability lift in NPAT from continuing operations, which considers the demerger of Endeavour Group in FY22, to $ 1.6 billion. The Group includes Woolworths supermarkets, Big W department stores, and its retail media platform Cartology.
The positive results come amid several challenges. Woolworths Group CEO Brad Banducci remarks, “Despite the more stable environment, our overall customer experience was inconsistent, impacted by lingering supply chain challenges, and more recently by the impact of inflation on value for money perceptions. While overall customer demand has been remarkably stable, we are increasingly seeing our customers become more careful in their spending patterns, particularly our Saver Families, and in more discretionary categories.”
Ecommerce sales have receded slightly at 11 per cent of total sales compared to 11.4 per cent in FY22, though total revenue from ecommerce edged higher at $6.6 billion over $6.5 billion last financial year.
Banducci adds, “While the 2023 financial year marked a return to relative stability after several years of material COVID-related disruption, the rising cost-of-living pressures impacting our customers and team has now become our key challenge.”
Australian B2B demonstrated strong growth for the Group at 17.4 per cent over the previous year and contributed $4.3 billion in revenue. PFD Food Services, the Group’s food service distributor for business and wholesale customers, is said to have seen higher-than-usual demand due to a normalisation of the consumer environment and new customer acquisitions.
BIG W showed an 8 per cent revenue increase in FY23 to $4.8 billion, with profitability jumping 41.6 per cent to $348 million. However, inflation and cost-of-living pressures are taking their toll, as reflected in BIG W’s H2FY23 figures. Banducci says, “In BIG W, the slowdown in consumer spending has been more pronounced in H2, particularly in Q4… increasingly, customers are buying only what they need, which has seen a decline in items purchased compared to the prior year.”
As consumers indicate a shift towards more strategic spending, the trend of sales events driving results for retailers continues. BIG W reports record sales in H123 with a solid performance in seasonal events, including Black Friday, Easter and Christmas.
BIG W also opened 21 new “Direct-to-boot” sites and two eStores in Winston Hills, NSW and Watergardens, VIC, aiming to address evolving shopping behaviours. eStores are dedicated facilities for fulfilling online orders, which sometimes incorporate automated processes.
Woolworths Group revealed a mixed outlook for FY24. It says, “Sales in the first eight weeks of F24 showing similar trends to Q4 F23 with solid growth in Food”. While Woolworths retail food sales are up around 6.5 per cent, Big W sales are declining by about 6 per cent, which the Group says reflects cost-of-living pressures.
Banducci comments, “BIG W sales momentum continues to be challenged with sales down approximately 6% in F24 to date. While BIG W is being impacted by the broader discretionary spending slowdown in Australia, some categories like Everyday Essentials are performing strongly. Loyal customers are continuing to shop with BIG W, and we are seeing some trading-in but customers are cautious, putting fewer items in their baskets. The outlook for the remainder of the year is uncertain and as always, trading in Q2 will be key to the full year results.”
Woolworths Group notes, “The outlook for the remainder of the year is uncertain but trading in Q2 will be key to the full year results.” It plans to deliver value for customers, including actively helping them to “spend less this Spring”.