October 31, 2018 / 10:04 PM / 13 days ago

UPDATE 2-Australia Woolworths' quarterly sales growth sputters on "bag rage"

* Comparable quarterly sales growth of 1.8 pct slowest since 2016

* Hit by “bag rage” and rival’s promotion

* Says Oct sales has been “solid”; shares climb (Adds shares, analyst quote and background)

By Rushil Dutta

Nov 1 (Reuters) - Australia’s biggest grocer Woolworths Group Ltd posted its slowest quarterly sales growth in two years as shoppers turned away after it started charging for plastic bags.

The supermarket operator has borne the brunt of a backlash dubbed “bag rage” when it moved before main rival Coles to charge for one-use plastic bags in June.

Woolworths reported on Thursday comparable grocery sales growth, which strips out store openings and closures, was 1.8 percent for the three months to September 30, the slowest since the corresponding period in 2016. That compared with 3.1 percent for the previous quarter and a 5.1 percent jump at Coles.

“Australian food had a challenging start to the quarter with sales impacted by our customers’ and team’s adjustment to the removal of single-use plastic bags,” Woolworths said in a statement.

It was also hit by Coles luring shoppers away by handing out promotional toys to children, though since that ended around mid-September, Woolworths said its sales momentum improved and has “remained solid in October”.

Woolworths’ shares climbed as much as 2.2 percent to a two-month high, and then erased some of the gains to be up 1.2 percent in afternoon trading.

“They were concerned that the ban on single use plastic bags may hit them hard. It certainly did seem to have had an impact,” said Michael McCarthy, chief strategist at stockbroker CMC Markets.

“The publicity on the ground has died off very rapidly. It had an yo-yo impact where they grabbed a lot of attention for a short period of time.”

Woolworths’ total sales from its continuing operations rose 1.9 percent over the period to A$14.85 billion ($10.57 billion). ($1 = 1.4045 Australian dollars) (Additional reporting by Devika Syamnath and Aby Jose in Bengaluru; Editing by Tom Westbrook and Muralikumar Anantharaman)

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