Chicken, make-up and books: What the budget-savvy are buying at Woolies
By Emma Koehn
Woolworths customers are trading dinners out for buying groceries to eat at home and swapping red meat for chicken as cost of living pressures intensify. But chief executive Brad Banducci says the supermarket giant is well-placed as shoppers turn to the retailer for more of their everyday purchases.
Rather than customers “trading down” by buying cheaper goods, they were “trading in” to make more everyday purchases across the company’s grocery and retail stores, he said on Wednesday. Customers still wanted to spend on convenient solutions for entertaining at home as they readjusted their budgets in the face of rising interest rates.
“[Shoppers say], ‘I want to have a kind of eating experience at home. It’s got to be easy. I don’t want to have to be cleaning up’,” he said.
“How we [make] it easy to have an ‘eating out’ experience at home is valuable for a number of customers.”
The company said rising inflation was yet to have a big impact on overall group sales, though management highlighted that consumers had started changing their spending and moving many of their everyday purchases to the supermarket aisles or discount department store Big W.
Banducci said one of the most pronounced consumer trends was the shift from red meat to white meat after a period of elevated prices for products such as steaks, with the availability of poultry a key challenge for the business as people pivoted away from meat over the past few months.
Woolworths customers are also shifting their make-up purchases to the group’s own brand, with sales of Big W’s in-house cosmetics brand MCo Beauty up 50 per cent compared with last year.
Big W staged a rebound over the past six months, with sales at the budget-focused department store up 15.3 per cent to $2.7 billion, as the group moved past temporary store closures at the start of 2022.
The store’s chief executive, Daniel Hake, said trade was strong across kidswear and toys as young families came under pressure, while customers were citing Big W’s books offer as a key reason to come in-store.
“[Books] is one of the areas that does get mentioned, together with toys,” he said.
Big W’s online sales dropped by 31.4 per cent during the half, however, as shoppers went back in store. The company also flagged that item and transaction growth slowed towards the end of last year.
Woolworths was the latest retailer to confirm inflation picking up pace in the lead-up to Christmas, with food prices jumping 7.7 per cent across its stores in the three months to December.
Rising chicken and dairy prices drove the increase, though like rival Coles, Woolworths’ fruit and vegetable prices started to moderate in the lead-up to the end of the year.
Woolworths on Wednesday reported a net profit after tax before significant items of $907 million, a jump of 14 per cent. Earnings before interest and tax for the period came in 18.4 per cent higher at $1.6 billion.
Banducci said in documents lodged with the ASX on Wednesday that food sales had remained strong in the first seven weeks of the 2023 calendar year, rising 6.5 per cent.
“Sales momentum has continued to be strong in the half to date and the operating rhythm of our business continues to improve,” he said.
The company declared an interim dividend of 46 cents a share, a jump of close to 18 per cent on the same time last year.
Shares were 2.1 per cent stronger in mid-afternoon trade to $37.49.
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