Since taking on the role as Woolworths Group CEO at the end of February 2016, the Woolworths team and I have acted quickly to address the issues facing the Group so that we can once again generate strong returns for our shareholders.
My first priority as Group CEO was to focus our team on our customers. It’s pleasing to see that across our brands our customers are beginning to notice improvements. Our team is focused on providing a great shopping experience for our customers, and this has been reinforced with customer metrics. Over the last six months, we have also faced up to exiting businesses that are underperforming or loss making, changing the operating model to drive more accountability and focus on our core Food and Drinks businesses.
During the year we announced:
- A new operating model with 1,000 team members moved from the Group support functions into our businesses where they are closer to our stores and customers
- The separation of BIGW and EziBuy and exploring options for the sale of EziBuy
- Our planned exit from Home Improvement
We have taken the hard decisions to address underperforming businesses this year. This has resulted in significant items which have contributed to a very disappointing financial result and reduced dividends. In order to restore shareholder value we are focussed on a three to five year transformation of our business.
Our transformation is being guided by five key priorities:
- Building a customer and store-led culture and team
- Generating sustainable sales momentum in Food
- Evolving our Drinks business to provide even more value and convenience to customers
- Empowering our portfolio businesses to pursue strategies to deliver shareholder value
- Becoming a lean retailer through end-to-end process and systems excellence
The decisions we have taken and investments we have made have had a material impact on our financial results and returns to shareholders but they have been necessary to begin the rebuilding of Woolworths. All of us are committed to restoring value for you, the owners of our business.
Our Food and Drinks businesses are the centre of the Woolworths Group. They are the primary drivers of our earnings.
We are seeing the early signs of progress as we improve our offer and culture in Australian Food. Our top priority is to get customers to put us 1st and making the right decisions to make this happen. Customer metrics are improving with transactions, and more recently, sales growth, demonstrating that our customers are recognising our lower prices, better service, higher quality fresh fruit and vegetables and the improved store experience in existing and newly refurbished stores. Our new Own Brand ranges, Essentials and Woolworths, are also resonating well.
Our improving team engagement scores show we are changing our culture for the better. Supporting our store teams is key to getting customers to put us 1st and delivering improved financial results. We have invested significantly to increase store team hours to enable them to serve our customers better.
We have had a very positive response to our new brand advertising, ‘That’s why I pick Woolies’, and our sponsorship of the Olympic and Paralympic Games. Retail is about detail and we are fixing the basic, from signage upgrades to new trolleys. Importantly, we made improvements to our Woolworths Rewards program in response to feedback from our customers.
As a team we are focused on driving long-term performance through improved sales productivity in our stores, which has been reflected as a key metric in our long-term incentive plan. To achieve this, we have slowed down the rollout of new stores, and are investing in a Store Renewal program. We recognise we are at the early stages of our transformation. We are confident that the first steps we have taken have been the right ones.
We have much more to do in Food, including improving our relationships with suppliers.
Our Drinks business grew strongly. We opened 43 net new stores, established Langton’s East Asia, and our Pinnacle Wines won international platinum, gold and silver awards.
Countdown New Zealand performed well. Better prices, new stores and improved customer service drove sales higher with store team engagement and net promoter scores up.
At BIGW new CEO, Sally Macdonald, and her team are turning around one of Australia’s heritage retailers. They are refreshing stores, focusing on design‑led products and improving efficiency.
The joint venture in ALH is progressing well with a new Board, a stronger discipline around capital management and a clear strategy for growth.
BIGW, ALH and Quantium now all have separate governance and are overseen by their own boards. This structure will increase transparency and better enable them to pursue the strategies and organisation structures best suited for their businesses and for unlocking shareholder value.
We operate from over 3,800 locations in Australia and New Zealand. In every one of those operations we aim to be an integral part of the community, just as we aim to be an important part of the broader national communities.
Our purpose is to 'bring a little good to everyone, every day' and our team members really take this seriously. As a company we support OzHarvest, Foodbank, SecondBite, FareShare, Churchlands, House of Hope and The Salvation Army.
This year we donated more than 400,000 items of new school equipment to 13,148 schools and early learning centres across the country. In bushfires and floods, our stores mobilise in-kind support and resources for their communities. The Countdown team in New Zealand, with the help of customers and suppliers, raised $1.2 million (NZD) for children’s hospital wards around the country.
We continue to focus on making Woolworths a safe place to work and shop. Our workplace safety and health performance significantly improved with Total Recordable Injury Frequency Rate (TRIFR) down 23.54%.
We employ over 200,000 people who serve over 29 million customers a week. We have an extraordinary team who have worked hard for our customers in a difficult time for their company and we are very proud of our people.
We are building a culture where we are listening to our customers, our team members and our suppliers. Through our Voice of the Customer program, we are listening every month to 55,000 shoppers. We hope that you continue to experience improvements in your local store.
Thank you for picking Woolies.
MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER