Woolworths to slash jobs, product ranges in $400m cost-saving drive

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Woolworths will scale back its range of products and axe some office positions to reduce costs after a tough few months resulted in a $190 million loss, with more losses forecast over the coming months.

Last Wednesday, the massive supermarket chain unveiled a $400 million plan to cut costs and streamline the business, but it was met with consumer backlash after the consumer watchdog began taking action over allegations of price gouging, and a two-week long workers' strike left the shelves bare just a couple of weeks ago.

Chief executive Amanda Bardwell refused to say how many workers would lose their jobs or which grocery lines would be cut in the cost-cutting push after she described the latest six-month result as a "difficult and disappointing outcome".

"What we're discussing is a very targeted reduction in certain areas where we've noticed customers aren't needing or responding to the range of [products] in specific categories," Bardwell said to reporters on Wednesday.

“Fair dinkum, there's no set target on this at all.”

The plan was announced as the company revealed its net profits dropped by 20.6% to $739 million and earnings before interest and tax (EBIT) fell 14.2% to $1.45 billion over the six months to January 5. The decline was mainly due to lower grocery sales during last year's 17-day industrial action, which also led to extra costs for stocking shelves as part of the supply chain.

But customers kept on focusing on the value for money and affordability, said Bardwell.

Interim report into supermarket inquiry released in September.

which also caused liquor shortages at some of its Dan Murphy's and BWS bottle shops.

Bardwell admitted the supermarket chain could've handled the strike better. "I would've improved our communication to customers during that time as we saw an increasing number of empty shelves," she said.

“We've definitely taken that as a learning experience as a team, and we can and will improve in the future.”

Australia's biggest supermarket is keen to point out it offers good value, as it notices customers increasingly shopping around at various stores to get the best deals, especially at Bunnings, Costco and Amazon for non-food items like personal care, cleaning and pet products.

Bardwell said Woolworths hasn't seen a drop in customer numbers. "Our customers are still shopping with us, but they're buying fewer items each time, she said. They're buying from us, but also looking at other stores to compare prices."

Big W is a low-performing discount store that's always fallen behind its owner Wesfarmers' Kmart, which is causing significant losses. Big W's earnings almost halved (down 45.9 per cent) in the past six months to $29 million as it moved its products to cheaper lines, increased its clearance sales and had to pay higher wages.

Bardwell is optimistic that Big W will attract more customers and increase sales over the next few years. "It's a very competitive market at the moment."

Overall, sales at Australia's largest supermarket chain went up by 3.7 per cent to $35.9 billion, and online sales increased by 18.3 per cent to $4.7 million in the most recent half-year period.

Woolworths' Aussie food sales dropped by 12.8 per cent, which the supermarket said would've only been 5 per cent down if not for the strikes that led to an estimated $240 million in lost sales. Sales in Victoria are still to recover fully.

The ASX heavyweight's share price dropped 3% on Wednesday. The company's half-year profits fell short of market forecasts, which were already considered low, said Jarden analyst Ben Gilbert. "What will Woolworths do with the extra $400 million in savings? Will they bank it or invest it?" he asked in a note to clients.

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