Woolies ‘cautiously optimistic’ for Christmas even as food prices surge

The average price of food at Woolworths supermarkets has jumped by 7.3 per cent compared with this time last year as the supermarket giant grapples with the impacts of inclement weather and inflation of everyday grocery items including fruit, vegetables and red meat.

Woolworths boss Brad Banducci said in a trading update on Thursday that ongoing supply chain volatility and the possibility of another wet summer would be key challenges for the business as it seeks to deliver value to customers who are under increasing cost-of-living pressures.

“We continue to see early signs of customer purchasing habits changing, but it remains
unclear how much of this relates to cost-of-living pressures compared to COVID normalisation,” he said.

Woolworths Group CEO Brad Banducci. Credit:Oscar Colman

Woolworths said group sales rose 1.8 per cent to $16.3 billion in the 14 weeks to October 2 – the first quarter of its financial year. But Australian food sales weakened by 0.5 per cent compared with this period last year, when more shoppers were stuck at home due to the pandemic lockdowns.

Banducci confirmed that inflation continued to accelerate across the quarter, with the average price of food up 7.3 per cent in Australia, and 5.3 per cent higher in New Zealand.

The company did not specify the exact jump in fruit and vegetable prices during the quarter, but said there had been “double-digit” increases in this category.

“In fresh [food], inflation increased further compared to [the preceding quarter] with double-digit inflation in fruit and vegetables driven by inclement weather, as well as inflation in red meat, driven by higher commodity prices, and dairy products driven by higher milk farm gate prices,” Banducci said.

Last week, Woolworths’s rival Coles confirmed it had seen inflation of 7.1 per cent across its supermarkets, with prices for fresh food up 8.8 per cent.

Woolworths’-owned discount department store Big W continued to benefit from the end of retail lockdowns, with total sales hitting $1.2 billion for the quarter, up 30.1 per cent on the same period last year. Online sales at Big W more than halved though in a sign that people have gone back to the shops rather than shopping on the internet.

Despite the inflationary challenges, Banducci said that with 51 days to Christmas the company was focused on delivering customers an affordable festive offer.

“We are seeing strong early sell-through of seasonal lines, and we remain cautiously optimistic for the period ahead,” he said.

Woolworths shares closed down 0.8 per cent to $33.21 on Wednesday.

More to come.

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