Woolworths CEO Brad Banducci recently acknowledged that competitor Coles had outperformed his company during the last quarter. Woolworths faced challenges like unpopular promotions, supply chain disruptions, and cautious consumer spending habits, leading to lower-than-expected sales. This widened the gap between Woolworths and Coles and missed analysts’ predictions.
Banducci, who will soon step down, leaves behind a significant challenge for Woolworths: competing with a resurgent Coles in a market where consumers are keen on budget shopping. Unlike typical presentations, Banducci openly admitted Woolworths’ underperformance, stating they were “out-traded” by Coles during the quarter.
The sales figures disappointed investors, causing Woolworths’ shares to drop by almost 5%, hitting a four-year low. Coles’ shares also saw a slight decline, though less significant.
Analysts noted Woolworths’ struggles and questioned when the company’s long-term investments would pay off. Banducci attributed Woolworths’ sales woes to various factors, including inferior promotions compared to Coles, supply chain issues, and economic challenges affecting consumer spending power.
He highlighted that customers were increasingly focused on managing their expenses, a trend expected to persist for at least the next year. Consumer sentiment had shifted towards concerns about the cost of living, influencing purchasing decisions.
Despite the challenges, Banducci noted a positive trend: a growing preference for cooking at home, particularly with Mexican cuisine. Woolworths also experienced food deflation for the first time since 2022, indicating lower food prices compared to the previous year.
In contrast, Coles reported moderate inflation in its third-quarter results. Woolworths’ various business segments saw mixed performance, with Australian supermarket sales rising slightly, business-to-business food sales increasing, New Zealand supermarket sales growing, and Big W sales declining.
Overall, Woolworths faces the task of regaining market momentum amidst tough competition and changing consumer preferences.
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