Supermarket group’s CEO says removal of the throwaway bags had a greater impact than the company expected

This article is more than 2 years old

This article is more than 2 years old

Woolworths’ ban on single-use plastic bags has hurt the supermarket group’s sales, the chief executive admitted.

Although Woolworths on Monday delivered a 12.5% jump in annual net profit to $1.7bn, Brad Banducci said sales in the first seven weeks of the new financial year slowed as customers adjusted to the removal of the throwaway plastic bags from all checkouts across Australia in June.

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The decision had seen customers take longer to pass through checkouts, he said, and they had slightly different items in their baskets.

He also said that the bag ban had seen a greater impact than the company expected, based on experience in South Australia and Tasmania where bags were banned in April.

“Our experience when we did our pilot stores is that it does take somewhere around eight to 10 weeks for customers just to adapt to the new rules and we’re starting to see that happen,” Banducci said.

The company had added more staff at checkouts since the ban, and customers are starting to remember to bring their reusable bags, he said.

“Although it is a temporary impact it’s a slight negative - it’s changing consumer behaviour,” said Jason Teh, chief investment officer at fund manager Vertium Asset Management in Sydney.

“I was like most people with these bag changes ... I ended up just carrying my stuff, and basically walked out with two goods, just one in each hand – I’d normally buy extra.”

Coles, Woolworths’ great rival, ended single-use bags in July but backflipped on a plan to charge for bags after public pressure and continued to give them away for free.

The company’s full-year results were also been affected by falling prices for meat, fruit and vegetables.

The group’s Australian food unit – which includes nearly 1,000 Woolworths supermarkets – reported a 1.3% rise in comparable sales, which excludes new store openings, in the first seven weeks of 2018/19.

That compares with a 3.1% rise in comparable sales in the fourth quarter to 24 June, and 4.3% growth for 2017/18.

Banducci said full-year figure was the “strongest sales growth in a number of years”.

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Woolworths’ full-year net profit was $1.72bn while sales across the group – which includes supermarkets, beverages, department stores and hotels – were up 3.4% to $56.73bn.

Its drinks operations – which includes Dan Murphy’s, BWS, Cellarmasters and Langtons – booked a 2.8% rise in pre-tax earnings to $516m.

Woolworths’ pubs and poker machines business lifted earnings 11.1% to $259m and sales by 3.7 % to $1.6bn.

Woolworths will pay a final dividend of 50c a share, unchanged from a year earlier, plus a special dividend of 10c a share.