Woolworths CEO looks for customer emphasis as group reports $1.2bn loss

Woolworths’ CEO has claimed the embattled supermarket giant is seeing the first stages of improved relations with its customers as it strives to turnaround its business model.

The group reported a net loss of $1.23 billion for the full year to 26 June 2016 off the back of $58.1 billion in sales across continuing operations, a 1.2 per cent dip year-on-year. Underlying earnings for the year in food and petrol were down by 40.8 per cent year-on-year, a reflection of lower sales growth driven by an investment into lower prices as well as a decline in average basket size.

In a statement, Woolworths CEO, Brad Banducci, described the 2016 financial year as one of unprecedented change for the group. He said these decisions have had a material impact on its results but are necessary for its future long-term.

“We are seeing early signs of progress as we work to restore our competitiveness and improve our culture in Australian food,” he said, noting a record voice of customer score for Woolworths in food in June. “We have also addressed significant issues facing the group with the decision to exit Home Improvement and decisive action taken on BigW to reposition the business.”

Like many ASX-listed organisations, Woolworths is hoping a whole-of-business emphasis on the customer will help return to stronger financial performance in the long term. Banducci said top of the group’s five priorities is getting customers to put the brand first and making the right business decisions to enable this to happen.

Alongside implementing a customer-first culture, Woolworths said this requires focus on good prices and the right range of products, great service, and the best fresh goods in the market.

“We are regaining competitiveness with improving customer metrics and sales and transaction growth demonstrating our customers are recognising our investment in lower prices, better service, fresh fruit and veg and improved store experience,” Banducci said.

In its financial report, the brand highlighted overall customer satisfaction scores had also lifted from 68 to 75 between Q3 and Q4 of the financial year.

“Our improving team engagement scores show we are also changing our culture for the better.”

Steps taken to build a better customer culture over the past year include a revision of short-term and long-term performance measures aligned with business transformation, the inclusion of customer and store KPIs in staff incentive plans, a new operating model that’s seen key shared service functions come much closer to the customer, and new tools for stores to provide feedback to the support office.

Woolworths has also launched a new initiative, labelled ‘Woolies Welcome’, that sees all support office team members spending a week in-store in order to get closer to the customer. In addition, work on a new brand strategy with its Essentials and Woolworths brands is well underway.

But there’s plenty of work left to be done. Earlier this week, Woolworths announced the return of a points-based customer loyalty program in order to reward more of its members after experiencing significant backlash on its new rewards offering upon launch last October.

At the same time, 1000 roles are being moved closer to stores and customers, the group stated. Of course, the staff realignment has come at the cost of other functions, and Woolworths today confirmed a further 500 positions are being removed from its support office and supply chain.

Alongside the customer emphasis, Woolworths’ other priorities are to generate sustainable sales momentum in food, evolve its drinks business, empower its portfolio business, and become a leaner retailer.

“While we are seeing early signs of momentum, we are not underestimating the size of the task that lies ahead, especially given the highly competitive nature of the markets in which we operate,” Banducci said. “As we have consistently said, this is a three- to five-year journey.”