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The New Daily
Business
Derek Rose

Woolworths says food inflation ‘frustratingly elevated’

The Woolworths Group says shelf prices rose by 5.8 per cent in the third quarter. Photo: AAP

The Woolworths Group says shelf-price inflation remains “frustratingly elevated” because of industry-wide cost pressures, despite some moderation.

The supermarket and Big W operator announced on Tuesday that its third-quarter sales rose eight per cent to $16.4 billion compared with a year ago.

Australian supermarket sales for the 13 weeks to April 2 were up 7.6 per cent to $12.3 billion, while Big W sales were up 5.7 per cent to $1 billion.

“In general, customer spending is stable,” chief executive Brad Banducci said.

“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 eCommerce platforms.”

Food prices increased by 5.8 per cent compared with the previous year, driven by supplier cost-price increases.

That was down from a 7.7 per cent annual rise in the second quarter.

Improved fruit and vegetable growing conditions, lower livestock prices and already high inflation in the previous year contributed to the moderation.

Mr Banducci said there were signs of inflation moderating in Woolworths’ food business, but in many areas it remained “frustratingly elevated” and the group needed to continue to work hard to provide customers with value.

He said Woolworths was focusing on affordable protein, leveraging the company’s own and exclusive brands and its seasonal and member offers.

While out-of-stock products have reduced, they remain above pre-COVID levels and are an area of focus, the company says.

Woolworths credited its Brick Farms promotion for a Lego-like set of collectible figurines with helping to boost supermarket sales during the quarter.

For Big W, increased sales of home, toy and leisure products offset a subdued start to winter clothing sales.

Sales for Woolworths’ digital platform WooliesX rose 12.8 per cent to $1.6 billion, with digital tools such as personalised shopping lists and recipes growing in customer importance.

Online sales made up 9.9 per cent of total Australian food sales, up slightly from 9.3 per cent in the second quarter.

E&P Financial analyst Phillip Kimber said that in three key areas – Australian supermarkets, New Zealand supermarkets and Big W – Woolworths had outperformed expectations.

Woolworths’ Australian food sales also slightly outgrew Coles’ sales after lagging them for the last two quarters, Mr Kimber said. But excluding online, Coles was marginally ahead.

At 10.11am AEST, Woolworths shares were flat at $38.88.

– AAP

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