Woolworths: Cheap Cheap not as successful as hoped

Sarah Homewood
By Sarah Homewood | 27 February 2015

Woolworths has said that while its Cheap Cheap advertising campaign to highlight low pricing has been well received by customers, it hasn't had the impact on business that was anticipated.

In its half-yearly 2014/15 financial results the retail giant said that it wasn't happy with its sales performance and was taking action through additional heavy investment in its supermarket business to maintain its market leader position.

In the results statement it said: “While our Cheap Cheap campaign has been well received by customers, our promotional programs were not as successful as we expected and we did not see the improvement in price perception we anticipated during the quarter,”

The investment will involve all aspects of its customer offering, which will be funded by a pipeline savings cost of in excess of $500 million, that the business is currently building.

The business reported sales of $32.4 billion, up 1.8%, or 3.4% if petrol is excluded. The business' net profit after tax, however, was $1280.4 million, which is down 3.1%. Earnings per share fell 3.9% to 102.0 cents.

Woolworths Limited also confirmed the appointment of former Bauer Media CEO Matthew Stanton as chief transformation officer, a move which was first tipped by AdNews in December.

Woolworths Limited CEO Grant O’Brien said: “Woolworths Limited today reported growth in net profit after tax before significant items of 4.7% for the first half of FY15.

“In Australian Food, Liquor and Petrol, earnings before interest and tax increased 7.3% on the prior half year. The sales momentum in October and November showed improvement, however trading in December was subdued and this trend continued into January.

“Cost savings have enabled us to continue to invest in lower prices. In Australian Supermarkets, customers benefited from lower average prices as reflected by deflation of 1.8% for the half year.”

O’Brien also discussed accelerated cost reduction initiatives and driving greater efficiency through the early stages of Mercury 2, a plan which is understood to be a key part of Stanton's remit going froward.

As part of its half-yearly financial announcement, the supermarket chain also announced a raft of changes to its food and liquor divisions, with the group appointing a new leadership team and naming a new managing director.

Director of liquor, Woolworths Liquor Group, Brad Banducci will step into the role of managing director, Australian Supermarkets and Petrol, with previous MD Tjeerd Jegen resigning after almost four years in the role.

 

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