Woolworths Group Ltd reports quarterly sales grow by 4%

Credit: Woolworths

Woolworths Limited (ASX: WOW) has reported its quarterly sales figures for the 13 weeks to 1 April 2018.

The company reported that total third quarter sales from continuing operations increased by 4.3%, when adjusting for the timing of Easter total continuing sales increased by 3.4%.

Australian food sales increased by 4.7% to $9.57 billion and comparable sales growth was 4.4%. This seems like a solid effort considering how little Wesfarmers Limited’s (ASX: WES) Coles grew its sales.

Woolworths reported that it saw no change in the number of items per basket, but it saw comparable transaction growth of 4.1% with its shoppers. The country’s biggest supermarket reported that the change in prices was a 2.8% decline excluding tobacco, showing that price pressure isn’t going away.

Endeavour Drinks, which includes Dan Murphy’s, registered sales growth of 6.9% to just over $2 billion. This has proven to be a star performer for Woolworths and comparable sales increased by 6.1%, which is a strong performance for a mostly online bricks and mortar business.

The New Zealand Food business reported sales growth of 3.4% in New Zealand dollars. The NZ business registered a slight decrease in items per basket and a decrease of 1.1% in the average price.

Thankfully, Big W showed a 3.2% increase of sales to $770 million. However when adjusting for Easter total sales reduced by 1.3% and comparable sales  were down 1.2%. Compared to Target this was a good result, but it shows that Kmart is still the leader in the department store area.

Finally, the Hotels segment registered a 3.3% increase in sales to $390 million.

Brad Banducci, the CEO of Woolworths Group, said “We are pleased with the progress we are continuing to make against our key priorities as we pivot from turnaround to transformation. We remain energised by the number of opportunities we see to continue to improve our business.”

Foolish takeaway

Woolworths has stopped the rot and continues to outperform Coles. The reasonable reduction of prices with a large focus on customer service is clearly helping and it will hopefully lead to profit growth for the supermarket giant.

However, I’m not going to invest in Woolworths shares even with this turnaround. I don’t believe that it can deliver market-beating returns because its sales are very unlikely to grow in the double digits and it isn’t cheap at 22x FY18’s estimated earnings.

Instead, I’d much rather buy shares of these top stocks compared to Woolworths at the current prices.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Wesfarmers Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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