Food sales ease for supermarket giant Woolworths as Sydneysiders return to eating out

The pandemic continues to give Australian retailers a bumpy ride, with Woolworths seeing a slowdown in food sales this month as lockdown restrictions in NSW ease.

The supermarket giant reported its September quarter results on Wednesday, showing group sales were up 7.8 per cent compared to the same quarter last year.

That included food sales in Australia growing by nearly 4 per cent and by almost 10 per cent in New Zealand as customers ate more at home, but store closures and trading restrictions slashed Big W sales by 17.5 per cent.

Metro Food Stores managed to increase sales by 8.7 per cent despite reduced foot traffic in city and transit stores, offset by new stores and strong sales in neighbourhood shops.

This month, however, customers in NSW started to return to eating out, but Big W sales trends improved as Greater Sydney stores reopened, chief executive Brad Banducci said.

“Given recent closures and restrictions, Big W’s results will be even more dependent this year on the Christmas trading period,” he said.

“While the outlook remains uncertain, and there are likely to be challenges in the weeks ahead, we are excited about helping our customers celebrate a much-needed festive season.”

The retail giant said industry-wide shipping and distribution delays had led to slower than planned Christmas stock build-up but was not expected to have a significant impact on inventory levels during the all-important trading period.

Those supply issues had contributed to higher prices in the New Zealand food business, combined with labour shortages and raw material cost increases, particularly livestock.

In Australia, average prices decreased across all major categories, except tobacco and meat.

Woolies noted in particular that fruit prices had fallen, partly due to increased supply of key items such as avocados and apples.

Business-to-business sales rocketed during the September quarter, surging more than fourfold largely due to the contentious $552m acquisition of family owned PFD Food Services, which was given the green light by the Australian Competition and Consumer Commission in June.

Woolworths also held its annual general meeting, where chairman Gordon Cairns sold the benefits of the recent spin-off of alcohol business Endeavour into a separately listed entity, saying the group would become a more focused food and everyday needs business.

In April, Woolworths abandoned Endeavour’s plan to build the Northern Territory’s first Dan Murphy’s booze barn, with a panel finding the proposal prioritised commercial objectives over good relations with the community and was insensitive towards local Indigenous people.

“We know that we don’t always get it right, and the findings from the independent review have provided many opportunities for learning as part of our journey towards reconciliation,” Mr Cairns told the meeting.

Asked by a shareholder how Woolworths planned to “fill the earnings gap left by the demerger”, he said there was “plenty of growth left in our bricks and mortar stores”.

“Secondly, there will be enormous growth opportunities in our online business,” he told investors.

Thirdly, the B2B business, including its majority stake in data analytics start-up Quantium, was growing faster than the direct business-to-consumer part of the group.

“Quantium actually have business opportunities around the world,” Mr Cairns said.

A curly question that Mr Banducci did not disagree with was why online shoppers were not encouraged to use debit or EFTPOS cards, with the shareholder saying “not everyone has a credit card or wishes to use them”.

“I think that’s a good point,” Mr Banducci said, adding it would be worked on.

Mr Cairns provided plenty of opportunity for investors to ask questions – although he did at one point grumble at the Australian Shareholders Association for “monopolising” the meeting, saying it was testing his patience.

He also gave a lengthy period to ensure all votes had been cast and there were no more questions before closing the meeting, saying “wow” when no more were forthcoming.

“I’d allowed three hours for this,” Mr Cairns laughed after the 70-minute gathering.

Judging from proxy votes, the resolutions look set to sail through.