Environmentally friendly shopping bags at Woolworths. Picture: Joel Carrett/AAP
Environmentally friendly shopping bags at Woolworths. Picture: Joel Carrett/AAP

PROFIT SLUMP: Woolies reveals bag ban pain

WOOLWORTHS has blamed poor sales in the first seven weeks of the financial year on "customers adjusting" to the plastic bag ban and Coles' Little Shop miniature promotion.

Announcing its full-year results on Monday, the supermarket said same-store sales growth in the first quarter of the 2019 financial year was tracking at 1.3 per cent, down from 3.1 per cent in the last quarter of 2018.

"Sales have been impacted by customers adjusting to the phasing-out of single-use plastic bags, a competitor continuity program (Little Shop), meat and fruit and vegetable deflation, and the cycling of our successful Earn and Learn program in the prior year," Woolworths group chief executive Brad Banducci said in a statement.

In response to bans in some states and territories, Woolworths and Coles chose to remove single-use plastic bags from their entire store networks from July 1, leading to customer complaints.

"We expect sales momentum to improve over the course of the half (year)," Mr Banducci said. "Our customer satisfaction metrics are broadly back to levels prior to the removal of single-use plastic bags, including Time in Queue."

Woolworths increased its full-year net profit by 12.5 per cent to $1.72 billion, with total sales up 3.4 per cent to $56.7 billion.

The supermarket giant said its Australian food division had delivered the strongest sales growth "in a number of years" with same-store sales up 4.3 per cent in the 52 weeks to June 24.

That's despite sales growth slowing in the last six months of the year, coming off strong growth in the prior corresponding period, high levels of fruit and vegetable price deflation and a "decline in infant formula sales".

"Our focus on customers putting us first remains at the core of what we do," Mr Banducci said. "All businesses saw an increase in customer satisfaction and traffic (transactions) during the year. Having fixed the basics, our focus is shifting to being 'consistently good' at the fundamentals and creating a meaningful shopping differentiation in the eyes of our customers."

Struggling department store chain Big W posted a loss of $110 million, despite eking out positive same-store sales growth of 0.9 per cent. Endeavour Drinks profit was up 2.8 per cent to $516 million, while the hotel and pokies division reported an 11.1 per cent increase in profit to $259 million.

The New Zealand supermarkets posted a 10.4 per cent decline in profit to $262 million, while earnings from Woolworths' discontinued home improvement and petrol arms came in at $195 million.

Woolworths will pay a final, fully franked dividend of 50 cents per share, unchanged from a year earlier, taking the ordinary dividend for the year to 93 cents per share, up 11 per cent. It will also pay a fully franked special dividend of 10 cents.

frank.chung@news.com.au



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