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Woolworths makes progress on its strategic priorities

As far as initiatives go, the following four strategic priorities laid out by Woolworths’ (ASX: WOW) management in November 2011 appear well grounded compared to some of the lofty statements other companies and management teams have made in the past.

  1. To extend and defend leadership in food and liquor
  2. To maximise shareholder value from the current portfolio of assets
  3. To maintain Woolworths’ track record of building new growth businesses
  4. To put in place the enablers for a new era of growth.

At the recent full year results presentation, management updated the market on how it is progressing with these strategic priorities.

On priority 1, the company has launched the “More Savings Everyday” campaign which has led to average price reductions of 2.9%, launched the ‘direct from farmers’ initiative and fresh bakeries which has improved the freshness and quality of the supermarket offering and refreshed 475 BWS liquor stores. All these initiatives have helped boost sales, volumes and earnings growth.

On priority 2, there has been significant and arguably more easily identifiable progress. Creation of the separately listed Shopping Centres Australasia Property Group (ASX: SCP) allowed for the release of around $500 million in capital, 34 hotels were acquired and added to the Hotels division, which just reported impressive performance, Big W has undergone important repositioning and the Dick Smith Electronics and Woolworths’ India businesses were divested.

On priority 3, the most notable aspect has been the move into the Home Improvement sector, which now boasts 31 open Masters stores. While Home Improvement is obviously the largest initiative which falls under priority 3, the supermarket giant has also invested in boosting online sales both organically and through the recent EziBuy acquisition.

On priority 4, the company has invested in its “world class supply chain” — particularly its distribution centre at Hoxton Park, which services the Home Improvement and Big W divisions. The company also acquired 50% in a data company which will allow Woolworths to ‘data mine’ for insights into its customers’ habits.

Foolish takeaway

It’s important for investors to keep an eye on management and see that it does what it says it will do. All too often management ‘moves the goal posts’ to suit the outcome rather than face up to facts. It’s good to see Woolworths’ management being upfront and scoring themselves against previously set markers — it’s a sign that this team is acting in the interests of shareholders. Interested in our #1 dividend-paying stock?

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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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