Woolworths Advised To Sell Big W And Halt NZ Expansion To Boost Sales

Major investors have recommended that Woolworths become leaner to focus on its core domestic sales to gain a competitive edge against rival Coles.

Speaking at an investor forum in Sydney this week, First Sentier Investors portfolio manager Dushko Bajic urged Australia's supermarket chain Woolworths to streamline the operations by offloading its discount chain, Big W, and halting expansion plans into New Zealand.

This strategy would boost sales in the domestic market and strengthen its competitive position against rival Coles, he said, according to Sky News report.

"Would just love you to be a simple Australian supermarket," Bajic, who was an investor in Woolworths, reportedly told CEO Amanda Bardwell recently.

Bajic urged Woolworths to rethink its strategy, as profits decreased 93% in the 12 months to July 1.

Meanwhile, the rival chain Coles reported AU$1.1 billion profit during the 2024 financial year, an increase by 2.1% from the previous year. Coles simplified its business by focusing mainly on two divisions -- food and liquor.

Bajic reasoned that "business within the (Woolworths) portfolio that's just destroyed capital," which was why he suggested selling Big W. He also urged the grocery chain to invest in business and prices and increase the "superior supermarket locations, which won't be able to be matched by your competitor."

Portfolio manager for Blackwattle Investment Partner, Ray David, also suggested that the chain should stop expanding into New Zealand and redirect its focus in the domestic market.

Woolworths had announced its plan to invest NZ$400 million (AU$367 million) to rebrand nearly 200 stores over the next three years. However, the company's New Zealand profit had dropped by 57% to AU$108 million in the 12 months to June 30, compared to last year.

"In theory, Woolworths should be the superior business given its scale, greater network density and control of end to end online logistics fulfillment," David said.

Compared with Coles, the chain "lost share recently and is a much more complex organization that spans Australian food, New Zealand, department stores and a range of new businesses such as pet food, distribution and online retail," he added.

Meanwhile, the supermarket chain denied any plans to sell Big W or the New Zealand Supermarkets Business, News.com reported.

"New Zealand Food and Big W had a challenging year impacted by value-conscious customers cross-shopping and trading down but both businesses made good progress on their transformation plans with improved Customer scores and item growth in Q4," a spokesperson for Woolworths Group said.