Woolworths concedes first-half performance was ‘below expectations’

Woolworths has conceded its first-half performance was below expectations as it copped a $240 million hit in missed food sales following strike action last year.

Chief executive Amanda Bardwell also flagged job losses as part of a $400m cost-saving program to simplify the business, but did not say how many roles will be cut.

Woolworths revealed the impact of the 17-day strike action by its warehouse workers — which left shelves bare across Victoria, the ACT and NSW — had ballooned to $240m, up from the initial estimate of $140m provided at the end of last year.

Earnings at its Australian grocery business declined 12.8 per cent to $1.39 billion, which included a $95m hit as a result of the industrial action in the lead up to Christmas.

Excluding the strike, supermarket sales would have increased by 3.7 per cent, instead of the actual 2.7 per growth recorded, while earnings would have declined by 5 per cent due to promotional investment and ongoing inflation in wages and other costs.

“We’re already in a pattern of behaviour from customers where we’re seeing increasing cross-shopping,” Ms Bardwell told analysts.

“Unfortunately, as we had the industrial action under way in December, it did mean that in many of our stores, customers did need to go to competitors to be able to get products that they may have wanted or to be able to complete a full shop.

“We’re competing for every customer and so we want to see those customers return fully to Woolworths.”

Ms Bardwell said sales in Victoria have not yet fully recovered but availability and customer metrics were returning to pre-disruption levels.

Group sales hit $35.9b, up 3.7 per cent on the previous year, with pre-tax earnings down 14.2 per cent to $1.45b. Net profit declined 20.6 per cent to $739m in the 27 weeks to January 5, but improved from the $781m loss reported a year ago.

“It’s a very disappointing result and it’s not a result that any of us would want to be delivering,” Ms Bardwell said.

When asked what she was doing to improve Woolworths’ underlying performance, Ms Bardwell said she would simplify its product range and improve availability.

The weak performance, which Woolworths chair Scott Perkins conceded was below its expectations, sent shares down 3 per cent to $30.60.

“We are focused on addressing these challenges and under our new CEO, Amanda Bardwell, we have a clear set of priorities for 2025,” he said.

“The fundamentals of our business remain strong and we are committed to meet our customers’ needs and create value for shareholders.”

As part of its cost-cutting program, Woolworths also plans to reduce its product range but Ms Bardwell did not divulge specific details about which lines would be discontinued.

“What we’re talking about here is really a very targeted reduction in some areas where we’ve just seen that customers are not needing and not responding to the number of different (products) that we have in some particular categories,” she told media.

“To be clear, there is no set target on this at all.”

Woolworths said consumer satisfaction was trending positively in the half before it was accused by the competition watchdog of tricking customers with fake discounts on hundreds of products. Rival Coles was also accused.

Ms Bardwell said while the grocer was “absolutely pleased” to see interest rates decrease for customers, and expected shoppers to continue seeking lowest possible prices.

“Value-seeking behaviour from customers looks like shopping more of our specials . . . looking for our own-brand products, and opening price points and continuing to compare prices, and therefore increasing numbers of customers choosing to cross shop across our competitors,” she said.

Earnings at its discount department chain Big W tumbled 46 per cent.

Woolworths has cut its interim dividend by 17 per cent to 39¢ per share, reflecting the lower earnings.