Woolworths backs Endeavour board, posts 5.3pc rise in Q1 sales

The nation’s largest supermarket chain’s sales over the first eight weeks of the first quarter of 2023-24 were up 6.5 per cent year-on-year, but growth in the balance of the quarter slowed.

In the Australian food division, sales increased 6.4 per cent to $13.1 billion. At Woolworths supermarkets, comparable sales increased 5.5 per cent (or 6.8 per cent excluding tobacco).

Mr Banducci said people were making “very conscious choices in how they spend money” and young singles facing high rents and couples under mortgage pressure were more calculating in their spending.

“We’re starting to see a lot of behaviour in particular in our out-of-home eating part of our business through PFD [Food Services]. We’re also seeing it somewhat in our stores,” he said.

Woolworths’ cheaper own and exclusive brand sales grew 7.8 per cent and by category, pantry, household care and milk, cream and cheese were particularly strong. Double-digit deflation in fruit and vegetables and meat resulted in average prices increasing only 2 per cent compared to the immediate prior June quarter.

Average prices for fruit and vegetables fell by 12 per cent because of improved growing conditions. The prices of berries, lettuce, cucumbers, capsicum and tomatoes all fell.

Mr Banducci said although livestock prices had come down, all other processing and transport costs had gone up, which does not reflect the rock-bottom prices farmers face for their sheep and cattle. Head of supermarkets Natalie Davis said lamb prices had dropped to $10 a kilo, the lowest since August 2018.

“I think we would expect to see more opportunities to pass some benefits to our customers in the protein area going forward,” Mr Banducci said.

E-commerce sales increased 18.4 per cent and Cartology media sales, including Shopper Media, improved by 28 per cent. Cartology sales were boosted by momentum in Big W and the Disney collectables program run in Woolworths shops.

Big W sales declined 5.5 per cent with a modest improvement in the latter part of the quarter, but profits are being dented by the fall in sales and higher wages. Mr Banducci observed solid growth in summer clothing and trading down by customers, but Christmas will determine the success of the half for the discount retailer.

Big W managing director Dan Hake said higher priced toys such as Lego sets were being shunned for cheaper items, such as Hot Wheel Cars or $10 inflatable toys.

New Zealand supermarkets continued to struggle. Mr Banducci outlined first-half EBIT was expected to be below the first and second halves of fiscal 2023, which equates to a 1 per cent hit to full-year group 2024 EBIT forecasts, or about $30 million, Barrenjoey analyst Tom Kierath said.

Shares in Woolworths fell 2 per cent to $35.63 on Wednesday.

Mr Banducci said although sales trends in October to date remained broadly in line with the first quarter, the environment was uncertain.

“Value for money remains a key focus for our customers across all our businesses,” he said.