Woolworths food sales jump 10 per cent in Q3

Supermarket giant Woolworths has reported a 10.3 per cent jump in food sales in Australia in the third quarter, with chief executive Brad Banducci describing it as “one of the most challenging periods in the history of Woolworths”.

Despite a slow start to Q3, Australian food sales reached $11.1 billion as the coronavirus pandemic prompted a surge in demand for groceries.

In New Zealand, under tight lockdown laws, the retailer’s food sales climbed 13.4 per cent to $AU1.8 billion.

Sales growth was particularly strong in March across Food and Drinks, excluding Hotels, which have been shut since March 23.

Long-life grocery items experienced the strongest growth, with items such as toilet paper, cleaning items, rice and pasta hoarded by consumers. Fresh sales also increased considerably, particularly around mid-March when panic buying was at peak levels.

The economic hit from the health crisis saw many consumers opt for own brand products, which experienced double-digit growth in the quarter. The retailer also noted a shift away from behind-the-counter products to pre-packed goods.

Metro food stores reported strong sales growth despite a major drop in foot traffic in CBD and on-the-go locations. Neighbourhood stores, however, continue to perform more strongly, Woolworths said.

The group’s other retail stores performed well over the period. Sales at Big W climbed 9.9 per cent to $866 million, and Endeavour Drinks rose by 8.9 per cent to $2.2 billion.

But while sales were high, so too were costs.

Operating costs surged as a result of the COVID-19 pandemic, with additional staff brought on board to meet demand across supermarkets, e-commerce and supply chain. The cost of cleaning, security and safety equipment also weighed heavily on the balance sheet.

The supermarket giant expects some of these costs to continue for the rest of Q4, particularly with the employment of approximately 22,000 new team members. The retailer is also scaling up online and ramping up warehouse capacity. Incremental costs in Q4 are expected to be in the range of $220 – $275 million.

While sales growth has continued in April, food sales have moderated compared to March, and Drinks sales growth has returned to pre-COVID-19 levels. This week the supermarket began easing product limits on household items such as toilet paper, rice, hand sanitiser and antibacterial wipes.

“The rate of sales growth for the remainder of the financial year is very difficult to predict at this stage,” Woolworths said.

Rival Coles reported its Q3 results on Wednesday with 13.1 per cent comparable sales growth, making it the highest quarterly comp sales growth in its history.

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