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Woolies shares dive as it slashes pursuits, shakes up administration
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Woolies shares dive as it slashes pursuits, shakes up administration

February 25, 2015

Media reporter

Woolworths is to roll out a suuply chain overhaul.

Woolworths says it now expects annual revenue boom to be as low as 1.eight per cent, having prior estimated increase of between 4 and seven per cent.

Fears about Woolworths’s longer-term outlook led to its share-value smash on Friday, after the No.1 supermarket issued a rare revenue downgrade, described its first-half of gross sales consequence as “unsatisfying” and introduced the departure of its supermarkets boss.

Reporting results that neglected analyst expectations, Woolworths wired it had chosen to downgrade its full-year profit growth determine to between 1.eight per cent and 6.6 per cent, from steering of four to 7 per cent revenue increase.

Grant O'Brien, CEO of supermarket giant Woolworths.

grant O’Brien, CEO of grocery store giant Woolworths. photograph: Wayne Taylor

The downgrade follows weaker-than-anticipated recent sales and plans to speculate greater than $500 million into grocery store price cuts, retailer enhancements and extra staffing.

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Chief govt supply O’Brien stated it became clear through a evaluate of the supermarket trade in January that the supermarkets weren’t operating in addition to they may and shoppers still believed they had been more expensive than their opponents.

“we’ve been aggressive but we want to be more cost-effective, and as a way to be less expensive we wish to make investments,” Mr O’Brien stated. 

“costs are going to return down over the coming months, with the intention that that … raise the selection of gadgets that persons are hanging into their basket.”

Woolworths said reasonable worth deflation used to be 1.eight per cent for the first half of. Rival Wesfarmers not too long ago reported first-1/2 meals and liquor value deflation of 0.7 per cent.

investors punished Woolworths for the downgrade, its shares closing down 9.forty six per cent to $30.71, in heavy trade and in opposition to a favorable broader market. Wesfarmers shares additionally fell three.5 per cent. 

One firm watcher said the droop used to be about whether or not Woolworths has been “over-incomes for a time period and used to be now going to unwind”.

Woolworths on Friday mentioned a three.1 per cent decline in first-half web revenue, to $1.28 billion. Underlying net revenue, except for a $103.7 million provision related to its bargain division retailer giant W, rose by means of four.7 per cent to $1.38 billion, consistent with expectations. 

For the six months ended 4 January 2014, total workforce gross sales grew by way of 1.8 per cent to $32.four billion, below expectations. salary earlier than interest and tax [EBIT] fell via three.three per cent to $1.98 billion.

Deutsche financial institution described the result as as “very low high quality”, given “vulnerable sales and a end result boosted through margin growth”. the end result was once also marred by means of a deeper loss for its hardware industry, Masters, with Merrill Lynch analyst David Errington questioning when Woolworths would make a decision it used to be “now too big a cost for the business”.

Woolworths also announced the departure of Tjeerd Jegen, its managing director of Australian Supermarkets and Petrol, who’s returning to Europe because the emphasis on worth cuts kicks off.

His departure has resulted in the appointment of Brad Banducci as managing director, Australian food and Liquor, and Dave Chambers being appointed director, Woolworths Supermarkets.

Reporting 1.7 per cent same-store gross sales boom at its flagship Australian meals and Liquor industry, and three.4 per cent increase, Woolworths admitted its new promotional programs – the “low cost low cost” campaign – were “not as a hit as we anticipated”. 

“The sale momentum [for Australian Food and Liquor] in October and November confirmed development, however trading in December was subdued which continued into January.”

The commentary contrasts with contemporary commentary from Wesfarmers, which suggested a robust Christmas and early 2015 gross sales at its retail companies

Mr O’Brien also defended this week’s announcement that it might enable folks to pick up their eBay orders from Woolworths supermarkets and large W retailers, saying it had been positively acquired and would assist faucet into shopper demand to pick out up orders in-store.

 

smh.com.au industry information.

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