Are Woolworths’ sales rallying?

By Harry Allan

Retail and supermarket leader Woolworths is beginning to show some signs of recovery after it recently put a turnaround plan in place.  Promotional work has seen the company’s sales grow compared to last year.

Woolworths reported first quarter like-for-like (LFL) sales were up 0.7 percent on a year ago - the first time sales have grown at Woolworths in nearly two years.

Overall food quarterly sales across all stores rose 1.7 percent over the year to $9.3 billion.

Chief executive Brad Banducci said the company was "making good progress" but cautioned, "While we are pleased with our progress, there remains much to do.

"Our trading performance over the Christmas period is crucial to the financial performance of the Woolworths group in the 2017 financial year."

While this recovery in sales is promising, there are a number of weak points in Woolworths’ business that are in need of redress. Quarterly petrol sales were posted at $1.2 billion, an 11 percent decrease on last year, but Woolworths is looking to sell these assets to either BP or Caltex.

The Big W department store chain is still floundering, with comparable sales down 5.7 percent. Deflation in the wider Australian economy saw its prices fall on average 3.7 percent.

Morgan Stanley retail analyst Thomas Kierath commented: "We believe that the relaunch of the Woolworths rewards program has contributed to a share shift from Coles to Woolworths during this period.

"Easing price deflation from -2.7 per cent in the 2016 fourth quarter to -1.9 per cent in 2017's first quarter has also helped drive LFL sales growth."

The result has been very well received by the markets - Woolworths shares were up 1.8 percent to $25.25.

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SOURCE: [ABC]

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