While Woolworths Group recorded a 10.7 per cent increase in group sales during 3Q20, CEO Brad Banducci said the last four months have been one of the most challenging periods in the history of the company.
Total sales for the quarter increased 11.3 per cent to $11.2 billion with comparable sales increasing 10.3 per cent. Total sales growth was approximately three per cent for the first seven weeks of the quarter but increased materially from the week ending Sunday 1 March due to COVID-19 pantry-loading. It peaked in the week ending 22 March with growth of over 40 per cent.
Online sales rose by more than a third (34 per cent) to $817 million.
Panic buying in March and April saw the company set up five third-party distribution centres in Victoria, New South Wales and Queensland, as well as a Big W distribution centre being partially repurposed to support supermarkets.
A record number of cartons were handled by Supply Chain during March with over 30 million cartons dispatched in the busiest week, higher than usual Christmas week levels. It continues to operate 24 hours a day and is running at capacity across most sites.
Banducci said sales growth across the group had continued across April, but growth rates have moderated relative to March.
Food sales growth in the first three weeks of April were in the mid-single digits with Drinks sales growth broadly back to pre-COVID-19 levels. The rate of sales growth for the remainder of the financial year “very difficult to predict”.
Long-life grocery items experienced the strongest growth including items such as toilet paper, cleaning items, rice and pasta.
Fresh sales also increased, particularly in the peak trading weeks in mid-March. However, there was a noticeable shift away from behind-the-counter products to pre-packed goods. Own brand performed strongly with double-digit growth in the quarter.
Digital traffic more than doubled in March to 38 million visits, with active app usage increasing to 1.2 million users. Customers increasingly started their shopping journeys online and used the website and app as a source of information for their food and everyday needs. The ‘researched online, bought in store’ (ROBIS) metric was at record highs.
While sales growth in March was particularly strong for Food and Drinks (excluding Hotels) businesses but was partially offset by higher incremental operating costs largely due to increases in team wages in Store, eCommerce and Supply Chain to meet higher demand and to support safety and social distancing. Incremental costs have also been incurred for cleaning, security and safety equipment.
Banducci said it was expected a number of those costs would continue for the rest of Q4, including those associated with the “temporary employment of approximately 22,000 new team members that will continue to support safety and social distancing, additional warehouse capacity, scaling up online (particularly the expansion of Home Delivery) as well as ongoing security, cleaning and PPE costs”.
In Q4, these incremental costs are expected to be in the range of $220 - $275 million for the Group (excluding Hotels). “The extent to which these costs can be offset for the remainder of the financial year will depend on the rate of sales growth and required level of safety settings,” he said.
Endeavour Drinks
Endeavour Drinks, whichs owns Dan Murphy's, BWS and Pinnacle Drinks, saw total sales rise 9.5 per cent to $2.3 billion and comparable sales increasing 8.9 per cent. It was an uptick after a subdued start to the year due to the bushfires, floods and other weather events. There was a pronounced surge in demand commencing on 22 March in Victoria and New South Wales which has now eased back to pre-COVID-19 levels.
In March, Dan Murphy’s was the key beneficiary of increased demand with stronger sales growth reflecting its strong brand resonance and breadth of range. Beer, Wine and Spirits grew strongly across both retail businesses; however, some trading down was evident as customers shifted towards larger pack sizes and away from premium products. This change in mix has now returned to normal.
In EndeavourX, Endeavour Drinks’ online sales increased by 43.1per cent, significantly above recent run-rates with online penetration increasing to 6.9 per cent.
BWS and Dan Murphy’s both delivered strong online growth with BWS’s sales growing by over 200 per cent for a week during the period of peak sales, albeit from a lower base.
