Woolworths Group’s latest Q3 sales growth of 4.5% was driven by strong Australian Food sales growth of 5.9% with Woolworths Food Retail sales also increasing by 5.9% (7.3% ex Tobacco), reports the retailer.

“In Q3 we made further progress on our strategic priorities with investment in value, fresh, convenience and execution delivering improved sales momentum in Australian Food which drove strong Group sales growth,” said Woolworths Group CEO Amanda Bardwell.

Middle East conflict creating uncertainty

Despite strong Q3 performance, Woolworths is seeing the early signs that the conflict in the Middle East is impacting its customer, suppliers and team.

“Our primary focus since March has been to take the necessary steps across the Group to minimise the impact on customers, while also recognising the genuine cost pressures being felt by our suppliers and transport partners,” said Ms Bardwell.

“The Group has mobilised rapidly to respond to this environment and we are engaging regularly with Government as their response plans are developed.

“While the impact on the Group to date has been limited, higher fuel costs and secondary effects are likely to have an increasing inflationary impact as we move through the calendar year,” she said.

Australian Food

Australian Food total sales increased 5.9% in Q3 to $13,828 million with strong growth from stores and eCommerce as well as complementary services (Media, wPay, Rewards & Services).

Weekly traffic to Group digital platforms averaged 31.0 million, up 10.5% on the prior year, credited to improvements to the Woolworths app search functionality and new digital tools including Snap & Shop and smart baskets, helping customers build predictive baskets based on their shopping history.

Woolworths Supermarkets store-originated sales grew 3.0% (4.5% ex Tobacco) driven by item growth and investment in the store network.

By category, Fresh sales grew 8.0% in Q3 with double-digit growth in Meat and Seafood as well as strong growth in Everyday Chilled as customer demand for high protein yoghurts and desserts continues to increase. Grocery Food sales grew 9.8% supported by Drinks, Health & Wellness and Snacking which benefitted from Easter in the quarter.

Everyday Needs sales grew modestly on the prior year following progress to address range and pricing gaps in key categories. Within Everyday Needs, Home Essentials showed the strongest improvement, driven by a strong promotional program, particularly in storage and cleaning. Tobacco sales declined 42% compared to the prior year with a modest improvement in trend compared to Q2.

Own and exclusive brand sales increased 6.7% in Q3 with growth in Grocery Food and Fresh partially offset by lower growth in Everyday Needs. During the quarter 123 new own brand products were launched including new products across globally inspired ranges La Mesita (Mexican), Lantern Alley (Asian) and La Gina (Italian).

Average prices (ex Tobacco) in Q3 declined 1.0% compared to the prior year. Lower prices in Home Essentials, Fruit, and Snacking were somewhat offset by ongoing cost pressures in Meat.

During the quarter, ten supermarket renewals were completed and one supermarket and one Metro was closed.

Other business

In Australian B2B, total sales increased by 4.9% in Q3 to $1,508 million driven by strong growth in B2B Food (up 9.6% to $937 million in the quarter). PFD sales increased 7.3% driven by strong growth in the QSR channel. Export Meat sales increased by 47.6% reflecting strong demand and elevated export prices. B2B Supply Chain sales decreased 2.1% to $571 million driven by a decline in SIW revenue due to lower Tobacco sales.

eComX sales in Q3 increased 23.8% and penetration reached 16.6%, up 2.4 pts on the prior year. On Demand continues to drive eCommerce delivery growth, says Woolworths, with 47% of delivery sales now fulfilled within two hours, up 8 pts on the prior year. Growth was supported by the continued expansion of MILKRUN and a new partnership with DoorDash in the quarter with On Demand delivery available in over 800 stores.

Complementary services (Media, wPay, Reward & Services) sales increased by 10.8% in Q3. Cartology momentum improved compared to H1 with a revenue increase of14.4% driven by the Food portfolio and successful events including Easter and the Fissler cookware continuity program. A highlight for the quarter was the migration of Sponsored Search onto Cartology Ads Manager, enabling self-service capabilities for clients.

Everyday Rewards saw record levels of member engagement with active members reaching 10.7 million and member sales growing faster than non-member sales.

Looking ahead

Looking ahead, Woolworths says it is still too early to predict with any certainty the direct and indirect impacts on F27 from the conflict in the Middle East and how this will impact customer shopping behaviours.

“By putting customers first and maintaining a strong focus on productivity and cost discipline, I am confident we can navigate the current environment to continue to build a stronger, more resilient business while balancing the needs of all our stakeholders,” said Ms Bardwell.

“Fundamental to our plans is our Group-wide commitment to making every dollar count and becoming a more efficient and resilient business as we outlined in August. This will enable us to continue to invest in lower prices, better experiences, and greater convenience for our customers.”