BIG W has reported its first positive revenue growth in almost a decade.
Turnover from the struggling department store grew by 0.7 percent to $ 3.566 billion in fiscal year 2018, while simultaneous sales rose by 0.9 percent – the first comparable sales growth since 2009.
The losses fell from $ 151 million last year to $ 110 million, an improvement of 27 percent in the bottom line. Woolworths said that comparable sales growth of Big W accelerated to 2 percent in the last three months of the year, on the back of children, at home and seasonal clothing.
"The fourth quarter was pretty strange," Woolworths Group CEO Brad Banducci told analysts on Monday. "(We had an endless summer followed by a quick winter.) It was a quarter of the two halves, rather confusing."
Woolworths said by the end of June, Big W had dropped prices on more than 4500 items, 165 stores renewed, one new store opened and three closed to end the year with 183.
The chain has "re-established" its product ranges in line with the core needs of the customer, while Click & Collect is being extended to all stores, resulting in a 25% increase in average weekly visits to the Big W website.
The number of items purchased per customer increased by 3.5 percent and the number of customer transactions grew by 1.4 percent, which Woolworths attributed to lower prices, improved series and better digital offerings.
Mr. Banducci said in a statement that the turnaround of Big W "has evolved in FY18". "Prices are significantly more competitive last year than this time, most stores have been renewed and the range begins to resonate with customers," he said.
"In FY19 we expect a further decline in losses as we continue to build momentum in the business, but as always, financial performance will depend on trading during the main Christmas period."
David Walker, CEO of Big W, said the new year was a strong start and that toy sales flourished in July. "The main challenge for us, of course, was the late start of winter," he said.
"Typically when the winter starts late, you do not make up for the turnover, we were lucky, we adjusted our purchase for the winter and ended the year with a lower stock, so we are now in a good position."
DGG Advisory retail analyst Geoff Dart said it was "too early to say that it was a turnaround". "One swallow does not make summer flavor," he said.
"They've certainly done a lot of promotional activities, but I'm still not convinced that it's sustainable, it's pretty easy to buy sales, as Coles has found and now pay the fine." It's important to look at the gross margins and EBIT. "
Mr. Dart said that the main problem was that Big W still did not have a "value proposition, and by that I mean a reason to go there".
"There is a chance (long term)," he said. "They make almost $ 4 billion in sales, a significant company (s) significantly larger than Target."
He said that Big W had to go slightly up-market to avoid competing with Kmart and instead tried to gain market share from Target and Myer in the "value for money" segment.
"Kmart absolutely own cheap and cheerful, Target is cheap fashion, Myer has failed to keep the middle way," he said. "I think the big chance is to cannibalize Myer."