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Woolworths Shares Rise On Sales Growth

This morning, Woolworths Group Ltd (ASX: WOW) reported its quarterly sales for the 13 weeks to 1 April 2018.

Woolworths Group is the operator of Australia’s largest supermarket business and owner of Big W, hotels and Dan Murphys.

Here are some of the highlights:

  • Australian Food sales increased by 4.7% to $9.57 billion
  • Endeavour Drinks sales went up by 6.9% to $2 billion
  • New Zealand Food sales grew by 1.9% to $1.5 billion (in Australian dollar terms)
  • Big W sales increased by 3.2% to $770 million
  • Hotels sales increased by 3.3% to $390 million

Woolworths reported that total third-quarter sales from continuing operations increased by 4.3% to $14.24 billion and sales from its same stores increased by 4.4%. But, some of this increase was due to the timing of Easter. Woolworths calculated that when an adjustment for Easter’s timing was made, sales increased by 3.4%.

Woolworths’ management has been working hard on improving customer’s satisfaction. According to its research, Woolworths improved its overall customer satisfaction to 81% from 75% a year ago.

Woolworths supermarket has been reducing its prices recently with the company reporting that its average price had decreased by 1.3% during the quarter compared to a year ago. Fruit and vegetable price deflation “remained high” at 5.4%. That’s great news for Aussie households but not so much for Woolworths’ revenue or that of farmers.

The BWS and Dan Murphy’s segment, called Endeavour Drinks, saw total sales rise 4.3% after adjusting for the Easter effect. Management pointed to the online sales of Dan Murphy’s and BWS growing by 20% as an important factor in the result.

Big W registered a 1.3% sales decline after adjusting for Easter. Management said a number of seasonal factors such as warm weather and the school holidays not aligning with the Easter public holidays were an issue this year. Management will continue to lower prices and provide a better shopping experience. This is important in the face of growing competition from Kmart and Target, owned by Wesfarmers Ltd (ASX: WES), and online stores.

Woolworths Group CEO, Brad Banducci, said: “We are pleased with the progress we are continuing to make against our key priorities as we pivot from turnaround to transformation. We remain energised by the number of opportunities we see to continue to improve our business.”

“Our focus for the remainder of FY18 is on delivering consistently good shopping experiences across all stores and days of the week, embedding current strategic initiatives including ‘Simpler for Stores’ and continuing to improve our digital experience.” – Banducci

Woolworths shares are slightly up by 0.7% this morning according to Google Finance as investors react to the ASX announcement.

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