On Thursday, Woolworths Group Limited (ASX: WOW) unveiled its 13 weeks reports to 31 March 2019 with sales from continuing operating moving up 4.2% to $14.89 billion compared to the previous corresponding period.
The favourable sales momentum was primarily driven by BIG W Easter-adjusted comparable sales growth of 7.4% followed by 5.9% comparable sales growth in Endeavour Drinks and 4.2% in the Australian Food segment. While the company has positive transaction and item growth, lower deflation and settled weather had been a key driving factor in the growth of revenue.
During the quarter, online growth has been the highlight as the Woolworths online sales growth stood at 35.1% including record online penetration of 6.6% in New Zealand Food segment. But the company had to shed-off 8.1% in revenue from a discontinued operation on the completion of Woolworths Petrol sale to EG Group; proceeds of $1.7 billion being reportedly returned to shareholders.
Let’s take a deep dive into the individual performance of each segment:
Australian Food revenue increased to $10.02 billion in March 2019 quarter compared to $9.62 billion in the previous corresponding year. This represents the improvement in sales momentum over the third quarter with Easter-adjusted sales growth of 4.7% driven by more settled weather as well as strong trading around key events such as Australia Day, Lunar New Year and Valentine’s Day and a successful Disney Words continuity program.
During the quarter, four new stores were opened, of which one was a Metro which continued to perform well in the quarter with double-digit sales increases. Further, three Renewals were reportedly completed in the quarter with 46 Renewals in the year to date.
However, the consumer metric has shown a slight downtrend due to lower scores for Fruit & Vegetables underpinned by higher prices and supply issues.
New Zealand Food
New Zealand Food delivered solid Easter-adjusted comparable growth of 3.8% on the back of strong sales in Fruit & Vegetables and Perishables. There has been as much as 42.8% growth in online sales with record online penetration of 6.6% and Pick up growth continuing to be a highlight.
Its customer metrics improved on the prior year with Store-controllable VOC up two points to 80% and one point below the December seasonal peak of 81%. The biggest driver of the improvement was Fruit & Vegetables with an eight-point improvement compared to Q3’18, due to the ongoing focus on quality through the direct grower program and store training.
Big W’s Easter-adjusted sales increased by 5.6% with Easter-adjusted comparable sales increasing by 7.4%. But as indicated by the company earlier, despite the strong sales growth, Big W’s profit improvement is slower than scheduled which could result in a loss before interest and tax of $80-$100 million in FY19.
Endeavour Drinks’ Easter-adjusted sales increased by 6.4% to $2.72 billion in Q3’19. Online sales remained strong with a growth of 10.5%. But the overall Wine category in Australia contracted marginally in the quarter with Beer and Spirits category growth of approximately 2% and 4% respectively.
In Q3 FY2019, seven BWS stores were reportedly opened and one was closed taking the total fleet size to 1,338. No new Dan Murphy’s were opened during the quarter with 227 stores at the end of the period.
In the Hotels segment, the company reported Easter-adjusted comparable sales growth of 2.7% in Q3’19 driven by strong growth in Bars and Food and benefitted from the timing of New Year’s Eve. Further, three Hotels were acquired in Q3’19 with 327 venues at the end of the quarter.
Commenting on the company’s future plans, Woolworths Group CEO, Brad Banducci stated: “The company is progressing its strategic priorities focus now moving to plans for F20 to deliver for its team members, customers, and shareholders.”
Fiscal 2019 are scheduled to be released on 29 August 2019.
In today’s trading session, WOW stock price has edged up by 0.845% to trade at $32.240 on 2 May 2019 (3:01 PM AEST).
Also Read: Woolworths’ 1HFY19 Results
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