The improvements we delivered in Australian Food during FY17 resonated with customers as our Voice of Customer (VOC) scores improved consistently throughout the year, with store-controllable VOC sitting at 81% in June 2017.
Australian Food sales momentum continued into the fourth quarter with Easter adjusted sales growth of 7.8% and comparable sales growth (Easter adjusted) of 6.4%. Comparable customer transaction growth of 5.2% (Easter adjusted) and an improvement in items per basket drove comparable item growth of 5.6% inthe fourth quarter.
Sales for the year of $36.4 billion increased 4.5% on the previous year, while comparable sales increased by 3.6%. Online sales grew by 15.8% for the year with 18.7% growth in the second half.
Our VOC scores have continued to improve over the financial year with Overall Customer Satisfaction reaching 78% (FY16: 75%) and store‑controllable VOC increasing to 81% (FY16: 77%). Both have improved on Q3’17. We have seen an improvement on the prior financial year across all seven store-controllable VOC metrics. On-shelf availability and Fruit & Vegetables remain our biggest opportunities for further improvement.
Sales per square metre increased by 1.3% to $16,213, compared to FY16, driven largely by the improvement in comparable sales growth. During the year we closed 22 stores and opened 25, including six Metros, ending the year with 995 Woolworths Supermarkets and Metro stores. We closed two Thomas Dux stores with three remaining at year end. Despite the store closures, average space growth for the year was 3.1% compared to FY16 due to timing.
Average prices declined by 2.1% in FY17 as we continued to lower prices for our customers. Deflation eased in the fourth quarter to 1.2%, as we experienced inflation in Fruit & Vegetables, with deflation ex-Tobacco and Fruit & Vegetables in the fourth quarter of 3.3%. Customer price perception is beginning to improve but remains a major opportunity and reflects our focus on improving customers’ trust in our prices through lowering shelf prices, with approximately 3,500 products on our Low Price Always or Price Dropped programs at the end of the year.
The increase in gross margin of 70 bps to 28.07% is primarily due to material improvements in stock loss and, to a more limited extent, improved product mix and promotional effectiveness offset somewhat by net investment in price.
CODB as a percentage of sales increased by 101 bps as we invested in team hours and higher team performance based bonuses compared to the prior year. We have also invested in training and in our IT Foundations and Renewal programs, which contributed to higher depreciation.
EBIT declined by 2.4% to $1,603.1 million for the year resulting in a full year EBIT margin of 4.41%. Second half EBIT increased by 13.2% at a margin of 4.48%. Excluding the impact of incremental team incentive payments during the year, EBIT increased by 8.3%.
Strong working capital management resulted in a significant reduction in average funds employed, which has more than offset the reduction in underlying earnings and led to an improvement of 32.7 pts in reported ROFE.
|BEFORE SIGNIFICANT ITEMS1||FY17
|Gross margin||(%)||28.07||27.37||70 bps|
|Cost of doing business||(%)||23.66||22.65||101 bps|
|EBIT to sales||(%)||4.41||4.72||(31) bps|
|Sales per square metre||($)||16,213||16,000||1.3%|
|Return on average funds employed (ROFE)3||(%)||166.1||133.4||32.7 pts|
* Adjusted for the timing of Easter which fell in Q4’17 (Q3’16 LY).
n.c. Not comparable
n.m. Not meaningful
- There were no significant items recognised in FY17.
In FY16, total significant items of $4,013.7 million before tax ($2,627.8 million after tax attributable to equity holders of the parent entity) were recognised. Details of these costs have been provided in Note 1.4 of the Financial Report. Where noted, profit and loss items have been adjusted to reflect these significant items.
- In line with the classification of Petrol as a discontinued operation, the financial performance and operating metrics previously disclosed under ‘Australian Food and Petrol’ has been split to disclose Australian Food separately from Petrol in this announcement. Funds employed and ROFE have also been separately presented for Endeavour Drinks.
- Return on funds employed (ROFE) is calculated as EBIT before significant items for the previous 12 months as a percentage of average (opening, mid and closing) funds employed. This methodology has been adopted for FY17 and FY16. In previous reporting periods, ROFE was calculated as EBIT before significant items for the reporting period as a percentage of average (opening and closing) funds employed. Lease adjusted ROFE adjusts funds employed for the present value of future lease obligations and EBIT for the implied interest on those obligations.
- Growth for New Zealand Food is quoted in New Zealand dollars.
- Operating cash flow as a percentage of group net profit after tax before depreciation and amortisation.
- Group earnings before interest, tax, depreciation, amortisation and rent (EBITDAR) divided by rent and interest costs. Rent and interest costs include capitalised interest but exclude foreign exchange gains/losses and dividend income.
- The credit ratings referred to in this document have been issued by a credit rating agency which holds an Australian Financial Services Licence with an authorisation to issue credit ratings to wholesale clients only. The credit ratings in this document are published for the benefit of Woolworths Group’s debt providers.
4.5% from 2016
2.4% from 2016
"The fruit and veggies are always fresh and good quality."
"Woolies always has value for money and have a great range of products & excellent weekly specials."