Consumers are becoming increasingly frustrated with the soaring food prices and interest rates, Australia’s largest supermarket chain says.
Woolworths Chief Executive Brad Banducci said there are signs of overall inflation moderate in food, while inflation in many areas has been stubbornly elevated. He said the group needed to continue working hard to provide customers with value.
“I use the word frustrating just in the context of our customers. We are very cognizant of the pressure they are under and our need to deliver value,” Banducci said on Tuesday as Woolworths released its March quarter sales result.
The price of the supermarket giant’s food items jumped 5.8 percent in the 13 weeks to April 2, as it passed on cost increases from suppliers.
On the other hand, better fruit and vegetable growing conditions and lower livestock prices at least meant food inflation was not as bad as in the December quarter when prices rose 7.7 percent.
The Woolworths boss said that customer spending is stable in general, but some are more conscious about saving the dollars.
“However, value-conscious customers are becoming more thoughtful about their discretionary spend, trading into more affordable options such as our own brands and looking for additional ways to save in-store or through our digital, rewards and e-commerce platforms.”
Further, Banducci said Woolworths was leveraging the company’s own exclusive brands by making the protein more affordable.
However, he said pressure remains high in the chilled categories, in particular milk, cheese, and butter.
“The farm gate milk prices are continuing to be relatively elevated, and so you see those categories still with a lot of inflation—underlying inflation within it,” he said.
“The same is true in bread, with the grain where it is at the moment. Grain prices again continue to be relatively high. So, a lot of pressure when you get into bread.
“Then if I moved back into the rest of the store, really it becomes a category-dependent scenario. Pets has been an area we have been very focused on providing value in ... there has been challenges on global pet foods.”
The March update revealed Woolworths quarter sales increased by eight percent to A$16.34 billion, compared to a year ago. This includes sales from Australian and New Zealand supermarkets, Woolworth’s online stores, business-to-business food services and Big W.
Australian supermarket sales for the 13 weeks to April 2 were up 7.6 percent to $12.3 billion, while Big W sales were up 5.7 percent to $1 billion.
While out-of-stock products have reduced, they remain above pre-COVID levels and are an area of focus, the company said.
For Big W, increased sales of home, toy and leisure products offset a subdued start to winter clothing sales.
E&P Financial analyst Phillip Kimber said that in three key areas—Australian supermarkets, New Zealand supermarkets and Big W—Woolworths had outperformed E&P’s expectations.
Woolworths’ Australian food sales also slightly outgrew Coles’ sales after lagging them for the last two quarters, Kimber said. But excluding online, Coles was marginally ahead.
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