Tuesday, August 9, 2022

Woolworths Group H1 F22 update

Woolworths Group has announced positive sales momentum going into Christmas, as it provided an update on its financial year 2022 first half trading performance this week.

Sales growth in the retailer’s Australian Food division is “positive” on a one-year basis and “strong” on a two-year basis, but “moderated” in Q2 following the easing of restrictions in NSW and Victoria, says Woolworths Group CEO Brad Banducci.

“We are pleased with our sales growth compared to the overall market and our customer NPS scores have remained strong,” he said.

“As we head into the key Christmas trading period we have a good in-stock position and positive trading momentum, and our team is working hard to ensure that our customers have access to all they need to make this a special Christmas.”

Covid challenges

Mr Banducci also reiterated the challenges of Covid-19 for the business.

“The first half of F22 has been one of the most challenging halves we have experienced in recent memory due to the far-reaching impacts of the Covid Delta strain and its impact on our end-to-end stock flow and operating rhythm,” he said.

The ongoing material costs of operating in a Covid environment has impacted the Group’s expected earnings in H1.

Mr Banducci says the costs have been more significant this year than last due to the combination of direct and indirect impacts from Covid-19.

“This includes the significant disruptions we have seen across the end-to-end supply chain, and the material inefficiency this causes in our stores, distribution centres and transportation,” he said.

Despite the various disruptions, Mr Banducci says Woolworths Group has made good progress activating its strategy.

“As customer behaviours begin to normalise and Covid-related supply volatility reduces, we expect an improvement in our underlying operating performance.”

Australian Food updates

Following the easing of lockdowns in NSW and Victoria during October, sales in Woolworths Group’s Australian Food division have moderated as customers return to more normal shopping habits.

Sales are also said to have been impacted by inclement weather, primarily in NSW, which has reduced outdoor entertaining occasions, as well as a material ongoing decline in tobacco sales.

Total sales in Q2 to date increased by 2.0% compared to the same period in the prior year (Q1’22: 3.9%), while sales on a two-year average basis have increased by 5.2% (Q1’22: 8.7%). Total sales in H1 to date have increased by 3.0% (two-year CAGR: 6.9%).

eCommerce sales have continued to grow strongly, increasing by approximately 50% (two-year CAGR: over 60%) in the half. In H1 to date, eCommerce has comprised over 100% of Woolworths Supermarkets sales growth with eCommerce sales penetration of 11.0%.

Approximately $40 million has been invested in continuing to build eCommerce capabilities, leveraging advanced analytics, and growing digital demand generation. Initiatives include improvements to the Delivery Unlimited subscription proposition, standing up Q-Retail, the launch of HealthyLife and Everyday Market, and investments in digital and data talent more broadly.

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