Finance Finance News Woolworths admits plastic bag ban hurt sales, despite boosted profit

Woolworths admits plastic bag ban hurt sales, despite boosted profit

woolworths profit
Woolworths has fallen foul of the industrial umpire. Photo: AAP
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Woolworths has revealed its supermarket sales have been stifled by the plastic bag ban.

The retail giant removed all single-use plastic bags from its Woolworths stores two months ago, shortly followed by rival Coles in July.

Announcing the company’s full-year results on Monday, Woolworths chief Brad Banducci flagged the impact of the bag ban.

“In Australian food, sales in the first quarter slowed with comparable sales for the first seven weeks of first quarter 2019 increasing by 1.3 per cent,” he said in a statement.

“Sales have been impacted by customers adjusting to the phasing out of single-use plastic bags, a competitor continuity program [Little Shop], meat and fruit and vegetable deflation, and the cycling of our successful Earn and Learn program in the prior year.”

Earlier this month Wesfarmers, which owns Coles, conceded its sales had also been affected by the phasing out of plastic bags.

Coles caved into pressure, backflipping on its momentary shift away from plastic bags, and announced it would continue to offer free bags for the remainder of the month.

Despite these new pressures, Woolworths Group posted a 12.5 per cent rise in annual net profit.

woolworths profit
Mr Banducci said scrapping single-use plastic bags hit Woolworths’ sales. Photo: AAP

“We expect sales momentum to improve over the course of the half [year] and are confident that we have strong plans in place to be ‘consistently good’ at the fundamentals and drive further shopping differentiation relative to our competitors,” Mr Banducci said.

Net profit for the 52 weeks ended June 24 rose to $1.72 billion, driven by renewed demand for its extensive food offerings and new stores, while sales were up 3.4 per cent from a year earlier to $56.73 billion.

The group’s Australian Food unit – which consists of nearly 1000 Woolworths-branded supermarkets – booked annual comparable sales growth of 4.3 per cent, the “strongest sales growth in a number of years”, Mr Banducci said.

In New Zealand, its supermarket operations were delivering “strong core sales momentum” following investments in the past two years, he added.

The company expects ongoing progress from its budget department store chain Big W in 2018-19, with a further reduction in losses likely.

“However, financial performance will continue to be driven by the key Christmas trading period,” Mr Banducci said.

Woolworths will pay a final dividend of 50 cents a share, unchanged from a year earlier, plus a special dividend of 10 cents a share.

Woolworths’ net profit jumps

  • Net profit up 12.5 per cent to $1.72 billion
  • Sales up 3.4 per cent to $56.73 billion
  • Fully franked final dividend of 50 cents/share, unchanged, plus a special dividend of 10 cents a share, fully franked

-with AAP

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