Australia's Woolworths beats Coles in food sales growth for third straight quarter

SYDNEY (Reuters) - Australian supermarket operator Woolworths Ltd WOW.AX said on it on Tuesday it had logged robust quarterly food sales growth, outpacing rival Coles for a third straight quarter on the back of aggressive discounting.

FILE PHOTO: Shoppers walk into a Woolworths supermarket in Sydney, Australia August 22, 2017. REUTERS/Jason Reed

Since quitting a disastrous foray into the hardware business in 2016, Woolworths has focused on revamping its food offerings, and in February, it beat Coles in food sales growth for the first time in seven years.

During the latest quarter, it added 290 products to a list of 3,800 permanently discounted goods, helping it notch up 4.9 percent in comparable-store food sales.

That compared to 0.3 percent growth for Wesfarmers-owned WES.AX Coles, which blamed its lacklustre performance on lower grocery prices after bumper harvests resulted in a vegetable glut.

“This would have to be probably the best set of Woolworths numbers I’ve seen in 10 years,” said Bank of America Merrill Lynch analyst David Errington on a conference call with company management.

Woolworths shares rose as much as 2.1 percent to their highest level in two months, while the broader market .AXJO was flat.

“It seems very clear that Woolworths is gaining market share...leadership in the grocery industry has shifted and Woolworths have stepped up” said Michael McCarthy, chief strategist at brokerage CMC Markets.

Overall revenue, including income from Woolworths’ liquor, fuel, hotel and discount department store divisions climbed 3.7 percent to A$14.52 billion ($11 billion).

Quarterly food sales for Woolworths were A$9.6 billion excluding liquor. That compared with A$7.97 billion for Coles including liquor.

Woolworths holds 37 percent of Australia’s grocery market, while Coles has 31 percent, according to data from market research firm IBISWorld.

Reporting by Tom Westbrook; Additional reporting by Rushil Dutta in Bengaluru; Editing by Edwina Gibbs