Department store Big W has recorded a 4.1 per cent decline in total sales for the third quarter of FY24 to just over $1 billion, with its parent company Woolworths Group reporting a decline in discretionary spending.
Sales growth in clothing and home were most impacted in the quarter with Woolworths reporting a slow start to Autumn/Winter for the clothing sales shortfall, creating some downside risk to the company’s previous expectations of EBIT (operating profit) breakeven in the second half of the FY24 financial year. Home sales were also reportedly impacted by ranging changes that resulted in availability challenges.
Outgoing Woolworths CEO Brad Banducci, who is expected to exit his role in September 2024, said there remains more to do in the clothing and home segments.
“Big W sales have become increasingly event-driven and needs-based with the number of items in customers’ baskets continuing to decline,” Banducci said. “While customers are cutting back in all areas, the trading areas that have been impacted the most are clothing and home.
“Our higher price point or ‘Best’ products in our ‘Good, Better, Best’ pricing hierarchy have also been challenged. By customer segment, budget customers have unsurprisingly been impacted the most with increased trading down to cheaper items, deferring purchases or not purchasing at all.”
Store originated sales make up the vast majority of Big W revenue, at $916 million, while e-commerce sales were at $86 million.
Big W reported that its app usage continued to grow with one million downloads to date and the layby feature enabled in the app during the quarter. Everyday Rewards scan rates increased to 57% per cent, supported by member price events, Big W app offers and seasonal campaigns.
BIG W’s total store network remained unchanged at 177 stores at the end of the quarter.
Banducci said that consumer sentiment in Australia and New Zealand has been weak for some time.
“However, since Christmas we have seen a noticeable change in consumer behaviour as customers have adjusted their budgets and spending following the holiday period which is consistent with Ipsos data which showed that the gap between cost-of-living concerns and other concerns continues to widen,” Banducci said.
“Customers are looking for more ways to save, are cross-shopping more, buying more own brand and buying more product on promotion.
“While we understand that our customers are fatigued by inflation, the rapid increase in grocery prices over the last two years is a relatively recent phenomenon after modest food inflation for much of the previous part of the decade. At the same time, household budgets are being materially impacted by increases in mortgages, rents, utilities, insurance and other key household expenses.
“However, customers shop our stores multiple times a week, are budget savvy and grocery price increases are very visible to them. This, together with customers feeling that they have some control over their food and grocery budget, brings grocery price increases into sharp focus.”
Woolworths Group also recorded a large increase in gross revenue in its ‘other’ segment, which includes online platform MyDeal, to $324 million. However, the increase was largely driven by the acquisition of a 55 per cent equity interest in Petstock in January, with sales of $254 million in the quarter.
Excluding Petstock, gross revenue increased 5.7 per cent due to a high single-digit revenue increase from Quantium offset by a small decline in MyDeal revenue.