Woolworths (ASX:WOW) is staging a comeback; supermarket sales are up, but not enough to produce a rise in profits
Peter Hitchner: Woolworths is staging a comeback
Supermarket sales are up, but not enough to produce a rise in profits.
The retail giant is now hoping major changes in store will drive a return to black.
Finance editor, Ross Greenwood.
Ross Greenwood: Woolworths was once one of the most profitable supermarkets on the planet.
Not today though as it keeps spending shareholders money to keep prices down, to stay competitive.
XX: Good for consumers, not so good for shareholders.
Ross: In the past year, Woolie’s profit from ongoing operations was $1.42 billion, down 3.6%.
But the profit fall comes despite an increase in sales.
Especially in its supermarkets.
Brad Banducci: The plan, unequivocally, for us has been to invest in our customers to get them to put our first and to do likewise for our team.
Ross: Woolworths has used around a billion dollars of shareholders money but the supermarket bosses are trying to find new ways to run their stores, to stop shareholders subsidizing your grocery bill.
Dr Gary Mortimer: They need to stop the price discounting
Craig Parker: They need to maintain that mighty position in the face of competitive pressures.
Ross: But these pressures also mean that the supermarkets themselves will change – the way you shop will change.
Now a really good example is the latest coca-cola product, the sugar-free coke.
Well Woolworths didn’t stop that – deliberately.
Because it wanted more shelf space for water products.
There’s also, in the future, going to be more generic brands.
Brad: I think ALDI have shown us what you can do with have an exclusive brands in the store.
Ross: And so-called phantom brands.
Dr Gary: A phantom brand is basically a supermarket brand that isn’t clearly branded
Ross: Just don’t tell the Woolies’ boss about those phantoms…
Brad: I would dispute the word phantom brand effective and an inside of Woolworths
Ross: But while supermarkets are the biggest issue for Woolies there’s another question…
Can discount chain Big W, that lost $150 million last year, be fixed for now?
The boss is sticking with it
Ross Greenwood; Nine News