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Woolworths reveals growth strategy

WoolworthsWoolworths has outlined its three year growth strategy, based on a new ‘Lean Retail’ operating model.

According to the retail goliath, the Lean Retail model will deliver more than $500 million of cost reduction across FY15/16 which will enable investment in improving all aspects of the customer experience including lower prices, better convenience, improved service and access, and a commitment to innovation.

The program will focus on three key areas: cost – improving efficiency and cost position through taking ‘real dollar’ costs out in a low inflation environment; customer -investing in a multi-faceted and seamless offer; and growth – growing customers and marketshare.

Investment in the customer offer will be funded through a significant and ongoing focus on cost management within non-customer facing operations.

Third quarter sales results for the 13 weeks to April 5, came in at $15 billion, an increase of three per cent excluding petrol or 2.3 per cent Easter adjusted.

When petrol was included, sales actually fell 1.6 per cent, impacted by changes to the Woolworths-Caltex alliance and declining fuel sell prices.

“At the half year 2015 results, we informed the market that Australian Food and Liquor sales in December and January were disappointing. While February and March showed some improvement as we commenced the actions announced in February, April was more subdued and there is still much to do,” said Woolworth CEO, grant O’Brien.

Australian Food and Liquor sales for the quarter were $10.6 billion, an increase of 2.3 per cent on the previous year or 1.7 per cent Easter adjusted. Comparable store sales for the quarter increased 0.7 per cent or 0.2 per cent Easter adjusted.

Petrol sales for the quarter were $1.2 billion, a decrease of 35.2 per cent on the previous year or 34.8 per cent Easter adjusted, impacted by a 22 per cent reduction in average fuel sell prices and changes to the Woolworths-Caltex alliance after which sales from Caltex operated sites are no longer recognised by Woolworths.

As anticipated, general merchandise results were adversely impacted by the Big W transformation, with sales for the quarter decreasing 2.1 per cent on the previous year, or 5.7 per cent Easter adjusted, and comparable sales decreasing 4.1 per cent or 7.3 per cent Easter adjusted.

Sales were also impacted by the continuing decline in home entertainment, the clearance of seasonal apparel, and ongoing price deflation.

Home improvement sales for the quarter were $455 million, an increase of 21.7 per cent on the previous year. Masters sales for the quarter were $217 million, up 21.2 per cent on the previous year, or 19.2 per cent Easter adjusted.

New Zealand Supermarket sales for the quarter were NZ$1.5 billion, an increase of five per cent on the previous year or 7.7 per cent in Australian dollars.

O’Brien, said the entire team is committed to doing what it takes to maintain and improve its position as Australia’s leading retailer.

“Woolworths is a strong business with lots of growth potential, and we are absolutely aware of the challenges we face to realise that potential,” he said.

“We place the customer at the centre of everything we do, and have updated our operating model to reflect evolving customer expectations. Our Lean Retail model builds on our historical approach of driving growth via seeking efficiency and investing in our customers but with a clear recognition that the approach needs to be tailored to a
modern era.

“Price is of course a key driver, and we will invest in ensuring we will not be beaten on price, but our customers also now expect greater use of technology and innovative offers to make their shopping easier and more enjoyable.”


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