Big W’s new strategy pays off
Big W has struggled through a tough decade of sales but now, a new strategy is attracting shoppers back to the department store.
The company reported its first positive sales growth in nearly a decade, with sales increasing by 0.7 per cent to $3.566 billion.
Big W’s losses also narrowed from $151 million last year to $110 million, a 27 per cent improvement in the bottom line.
Woolworths group chief executive Brad Banducci said on Monday that Big W’s comparable sales growth accelerated to 2 per cent in the last three months of the year because of the kids, home and seasonal apparel offerings.
“The fourth quarter was quite strange,” said Mr Banducci.
“(We had an) endless summer followed by a snap winter. It was a quarter of two halves, quite confusing.”
Woolworths said by the end of the financial year, Big W had slashed prices on more than 4500 items, refreshed 165 stores, opened one new store and closed three struggling stores.
The improvement in sales is also down to the department store choosing to “reset” its product ranges “in line with customers’ core needs”, while introducing click-and-collect to all stores.
Woolworths attributes lower prices, improved ranges and better digital offerings for a 3.5 per cent increase in the number of items purchased by each customer and a 1.4 per cent increase in the number of customer transactions.
Mr Banducci said that Big W’s turnaround “progressed in FY18”.
“Prices are significantly more competitive than this time last year, the majority of stores have been refreshed and the range is beginning to resonate with customers,” he said.
“In FY19, we expect a further reduction in losses as we continue to build momentum in the business but, as always, financial performance will depend on trading over the key Christmas period.”
Big W CEO David Walker said the toy sale carrying over into July helped Big W have a strong start to the new financial year.
“The key challenge for us was obviously the late start to winter,” he said.
“Typically when winter starts late you don’t make up the sales. We were fortunate, we tailored our buy for winter and ended up finishing the year with lower inventory, so we’re in a good position now.”
Despite the improvement, DGC Advisory retail analyst Geoff Dart said it was “too early to say it’s a turnaround”.
“They’ve certainly been doing a lot of promotional activity, but I’m still not convinced it’s sustainable. It’s pretty easy to buy sales, as Coles have found and are now paying the penalty. It’s important to look at the gross margins and the EBIT.”
Mr Dart said Big W needs to go slightly up-market to avoid competing with Kmart and instead take market share from Target and Myer.
“Kmart absolutely own cheap and cheerful, Target is cheap fashion, Myer has failed to hold the middle ground,” he said. “I think the big opportunity is to cannibalise Myer.”
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