Australia’s largest supermarket group Woolworths has had its credit rating downgraded after the release of financial results yesterday disclosed another drop in sales in the latest quarterly results.

The Woolworths’ group credit rating by Standard and Poor’s, a financial services company, is now BBB, down one notch from BBB+, two levels above “junk” rating.

The Woolworths group yesterday reported an overall drop in sales of 0.3 per cent for the third quarter of the financial year ending the 30 June 2016 when compared to the corresponding 2015 quarter.

Woolworths’ food and liquor divisions contributed to the decline with AUD$10.7 billion in sales achieved, a 0.9 per cent decline on the same 2015 period when adjusted to include the Easter period.

Recently appointed Chief Executive Officer of the Woolworths group, Brad Banducci, said sales in its supermarkets continue to be impacted by high levels of deflation, predominately from Woolworths’ investment in lowering prices.

“However, we are encouraged that customers are stating to notice the improvements we are making,” Banducci said.

“It will be a three to five year journey to rebuild Woolworths Supermarkets, but we are confident we are on the right track,” he stated.

“We have commenced a group-wide review across all aspects of our business. We are also adopting a new operating model designed to move accountability into the individual businesses as well as reviewing our corporate and shared service functions to ensure they are organised to best support these businesses,” Banducci said.

Woolworths’ New Zealand Countdown supermarkets achieved NZ$1.6 billion in sales, a decrease of -0.4 per cent Easter adjusted.

Petrol

Petrol sales for the quarter were AUD$1.1 billion, an 8.8 per cent drop on the corresponding quarter in 2015. Woolworths largely attributed the drop to an 8.1 per cent reduction in average fuel sale prices.

Hotels

Woolworths-owned hotels achieved sales of AUD $368 million, a 2.2 per cent increase on the previous 2015 corresponding period when adjusted to include Easter trading.

Woolworths said growth was led by bars and food driven by refurbishment investments and strong promotions.

Masters and Home Timber and Hardware

Masters’ sales for the quarter significantly increased 28.8 per cent Easter adjusted to AUD $282 million when compared to the same 2015 quarter.

The separate Woolworths Home Timber and Hardware retail chain had sales of AUD $225 million, down minus 3.8 per cent Easter adjusted.

Woolworths reported its Masters home improvement exit was progressing in accordance with its joint agreement with US company Hydrox.

Big W and EziBuy

Woolworths-owned Big W and EziBuy stores brought in sales of AUD $865 million, minus 4.5 per cent Easter adjusted when compared to the corresponding 2015 quarter. Woolworths said customers’ responses to its new season ranges reflected poor merchandising decisions in 2015 along with other factors including warmer weather delaying winter clothing purchases.

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