Woolworths posts double digit Q1 sales growth

Date : 04 November 2020

Nick Miles

Head of Insight - Asia Pacific

Woolworths has reported strong growth in Q1 FY21, with group sales up 12.3% to AU$17,853m.

Australian Food up 12.9% to AU$12,033m               

Australian Food sales continued to soar, boosted by COVID-19 and the retailer’s Ooshies collectables marketing campaign. Both stores and online played their part, with LFL sales up 11.5% and online sales growing 100% to $961m. Online penetration hit 8.0% of total Australian food sales, up from 6.3% the previous quarter. Woolworths opened five net new supermarkets and one net new Metro store during the period, plus refreshed 11 shops.

Great agility to respond to COVID-19

COVID-19 continued to impact performance in multiple ways. Standalone and neighbourhood stores continued to perform better than those in malls and city locations, with Metro Food Store sales declining 5.1% to AU$235m. Long life, fresh and tobacco all experience high demand due to altered shopping habits and the closure of other retail. Larger basket spend offset a 9.3% decline in transaction numbers, while ecommerce sales were inflated by the lockdown in Victoria, where online sales grew by a whopping 180%. To ease pressure on its network in Q1, Woolworths temporarily converted five stores in Victoria to solely fulfil online orders only, as well as temporarily suspend trading at five Metro stores.

New Zealand Food up 6.9% to NZ$1,877m

Sales in New Zealand remained strong, with LFL growth of 5.9% (vs. 4.8% in Q1 FY20). Sales did moderate during the period as restrictions eased and the retailer cycled marketing activity from the previous year. Like operations in Australia, the impact of COVID-19 continued to result in fewer customers, but comparable items per basket increasing 13.6%. Online sales continue to fly also, up 50.5%, with penetration of 11.9%. Sales were supported by the opening of a third dedicated fulfilment centre in Wellington, new in-app shopping functionality, as well as relaunching its Onecard loyalty scheme’s food rewards proposition. The retailer did not open any new stores, but it refreshed five shops and continued to invest in price, with 4,000 items now included in its Great Price programme.

Endeavour Drinks up 21.4% to AU$2,654m

Sales continued to benefit from higher in-home consumption, as well as Father’s Day trading, with LFL growth of 20.0% and Dan Murphy’s outperforming other formats. Interestingly, the impact of COVID-19 in the drinks business is the reverse of food, with higher transaction numbers and largely flat items per basket growth. In terms of category, spirits were the fastest growing category in Dan Murphy’s, with Gin in BWS leading the way. Wine sales remained strong, particularly premium varieties, as well as exclusive Pinnacle brand lines. While in beer, craft beer continued to drive category growth.

Online sales grew 57.6% and penetration hit 8.6%. Like stores, higher traffic offset declines in average order value. BWS online sales more than doubled, albeit from a lower base compared to Dan Murphy’s. The retailer opened five net new BWS stores and one net new Dan Murphy’s stores and refreshed 16 stores in Q1

Focus remains on in-home, online and COVIDsafe…

Big W continued to trade well during Q1, despite temporary stores closures and other obvious challenges. While Woolworths’ hotels business, as well as additional costs (AU$176m) due to COVID-19 continued to drag on total group performance. Although costs of doing business will remain elevated moving forward, as more premises reopen some of the impact on group sales will hopefully moderate in Q2.

Performance at the start of Q2, particularly in the food businesses has continued to slow, but remain elevated. Although Woolworths will start to cycle some tough comparative periods as the year progresses, it expects elevated sales and costs to continue, as it focuses on in-home consumption, online growth and COVIDsafe operations.