“The sales and earnings profile across our business was very different in H1 and H2 as we cycled the impact of Covid from late February onwards,” Woolworths CEO Brad Banducci said.
Retail expert and QUT professor of marketing Gary Mortimer said Woolworths is ahead of rival Coles on a number of fronts this year.
“Coles physical store sales are growing by about $152 million, in comparison. So it looks like Woolworths’ physical supermarkets and online outpaced their biggest competitor this financial year,” Mortimer told Inside Retail.
While Australian food sales performed well, increasing by 5.4 per cent to $44.4 billion, despite cycling the impacts of stockpiling in H2 the year prior, there was less to celebrate across the Tasman.
New Zealand food sales for F21 declined 0.6 per cent to $7.1 billion, impacted by low market growth in the first half and the restrictive lockdown in H2, and EBIT dropped 4.6 per cent. Customer scores were also impacted by availability issues, with VOC (voice of the customer) NPS decreasing two points to 45 and store-controllable VOC also decreasing two points to 80 per cent, due to global supply shortages and shipping delays.
“The voice of the customer result is down, suggesting dissatisfaction from customers to some extent,” Mortimer said.
Metro store sales declined by 4.9 per cent, due to low foot traffic in CBD locations, however neighbourhood Metros performed strongly with 10 new stores opened during the year.
E-commerce delivers $3.5 billion
Unsurprisingly, e-commerce was the big winner at Woolworths, delivering just over $3.5 billion, compared to Coles’ $2 billion announced last week.
Mortimer puts this nearly 75 per cent increase down to last year’s lockdowns and the introduction of new e-commerce infrastructure.
“Online penetration for supermarkets is quite interesting – 8.5 per cent – that’s 8.5 cents in every supermarket dollar now being spent online at Woolworths. We only have to look back a couple of years to see when online was only about 1.5 per cent of food and groceries,” Mortimer said.
“Coles and Woolworth have been investing heavily into their e commerce capabilities over the last 18 months. The development of the Woolies X Division certainly put them slightly ahead of their competitor Coles, but they’re also doing things like the e-stores, so their micro-fulfilment, decentralised system seems to be working. Coles is still yet to open their Ocado fulfilment centres, so I think when we start seeing more of these assets come on, we will see stronger growth in those online divisions.”
Record year for Big W
It was a record year for Big W, with sales of $4.6 billion in FY21, up 11.6 per cent on the prior year, despite the negative impact of lockdowns in the second half. Perhaps most impressive is Big W’s EBIT growth of 344.9 per cent to $172 million.
“Big W has struggled in the last several years,” Mortimer said. “Woolworths invested a lot of capital but also management expertise into that business. They’ve changed their pricing structure, they’ve changed their range, they’ve invested into stores.
“There’s a significant lift in sales per square metre, up 14 per cent, so that means they’re really utilising their floor space and increasing productivity of the space.”
Big W also saw significant growth in online sales, up 4.6 per cent, with penetration of online reaching a new record at nearly 10 per cent (9.9 per cent).
‘A materially different business’ post demerger
Endeavour Drinks sales increased by 9.6 per cent in FY21 to just over $10 billion, with EBIT increasing by 17.7 per cent as trends toward in-home consumption and premiumisation continued. Sales at rival Coles Liquor in comparison was $3.5 billion for the year, an increase of 6.6 per cent.
“Aussies are turning to Dan Murphy’s. Really productive stores in terms of sales per square metre, certainly well ahead of Coles,” Mortimer said.
In the last week of the financial year, the demerger of Endeavor Group was completed, moving from ownership to partnership between the two groups.
“It was a bittersweet moment but we are confident it was the right decision to enhance value for our shareholders,” Banducci said.
Looking towards FY22, “as a materially different business”, Woolworths will be “very focused on food and everyday needs and building out the ecosystem around that”, Banducci explained.
“While I’m excited by everything that this year has to hold for us, at the current moment in time, we’re just absolutely focused on dealing with all the challenges that the Delta strain of Covid is throwing our way.”