WOW - Woolworths Group

shouldaindex said:

I'm not sure what happens in the short term, but WOW margins are still at world record highs for supermarkets.

There would have to be a permanent unique reason for this, otherwise you'd expect them to be challenged, as is happening and mean revert.

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Woolworths won't maintain the margins unless management start making good decisions. Changing supermarket upper level management was a good start. They have been doing well but the problem for Woolworths is that, at least for the last few years, they have tried to keep growth up by cutting the amount of staff on the floor in their stores. You get to the point where you can't cut anymore. The issue is cuts take a toll on customer service as well. They weren't willing to reduce dividends and see the stock price fall and focus on increasing staff productivity and then cut when there are genuine redundancies. Most people go away feeling they are now doing the job of two people and end up quitting, especially if they are doing 80 hours a week on a salary. It may be true that they could do more work but Woolworths continually throw staff in the deep end instead of training them how to do their jobs better so that they can get rid of staff. At this point a lot of work gets put on salaried managers. Since they get in trouble if they don't perform the required work within the legal limit they are allowed to work, they have to clock off and continue working. I have heard of a manager (who would have only been on 50 - 60k) once working 18 hours straight.

The discontent at the bottom will end up coming back to bite Woolworths if they don't change their ways. They did recognise a morale issue but their solutions to it have been questionable - painting lunch rooms and forcing staff to do surveys which just told them people weren't too happy (painting lunch rooms is an odd choice when some management don't even get lunch).

Fortunately for many wow employees, at least the ones I know sold out their shares when they were above $33. One manager said he didn't since he is adopting a buy and hold forever approach but he was relatively young with a young family. Others were out of there since they could see the writing on the wall from the store operations level. Maybe they were wrong though and maybe the new upper level management can guide the company to actual growth rather than just cost cutting.

Valued said:

I have heard of a manager (who would have only been on 50 - 60k) once working 18 hours straight.

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That's funny because I'm a manager in a woolies supermarket and I grossed just under 75K last year and I'm pretty sure I'm the lowest paid department manager in the store. I've never worked 18 hours straight either, 12 is about my limit and that's only under exceptional circumstances.

poverty said:

That's funny because I'm a manager in a woolies supermarket and I grossed just under 75K last year and I'm pretty sure I'm the lowest paid department manager in the store. I've never worked 18 hours straight either, 12 is about my limit and that's only under exceptional circumstances.

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It depends on the size of the store though (I suspect you know this). The salaries are individually negotiated and results may vary from state to state. At any rate, higher salaries don't actually help Woolworths. If I am wrong it means they can do a few more cuts to management but they will still suffer the same issues in the end if they don't get more customers through the door. My point is, they can only cost cut so much before they can't cut anymore and then they have to rely on high real growth rather than growth partially through cost cutting. If not, they will see their stock price fall on poor figures. I suspect they could rebound from this but unless you're planning a buy and hold forever strategy, this is little comfort.

Valued said:

At any rate, higher salaries don't actually help Woolworths. If I am wrong it means they can do a few more cuts to management but they will still suffer the same issues in the end if they don't get more customers through the door. My point is, they can only cost cut so much before they can't cut anymore and then they have to rely on high real growth rather than growth partially through cost cutting. If not, they will see their stock price fall on poor figures..

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The supermarket business doesn't need to cut costs, it needs to spend more. My department made over 1.2mill gross profit last year, had more wages than we could spend because stupid uni students never want to come in to work. I don't think there's much argument to cut my paltry wage when I'm making money a heap of money for the company. The cost cutting only needs to be done in the divisions that are making losses, Big W and ****ing Masters, Masters of doing business at a loss. Get rid of these tards and the share price will rocket, (it's been going up lately just due to the news reports that Masters will get the ****) the supermarket and liquor business has been shackled by these spastics, cut them loose and its back to what woolies do best.

poverty said:

The supermarket business doesn't need to cut costs, it needs to spend more. My department made over 1.2mill gross profit last year, had more wages than we could spend because stupid uni students never want to come in to work. I don't think there's much argument to cut my paltry wage when I'm making money a heap of money for the company. The cost cutting only needs to be done in the divisions that are making losses, Big W and ****ing Masters, Masters of doing business at a loss. Get rid of these tards and the share price will rocket, (it's been going up lately just due to the news reports that Masters will get the ****) the supermarket and liquor business has been shackled by these spastics, cut them loose and its back to what woolies do best.

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That's the point, they need to stop cutting costs and spend more on improving their in store execution and customer service. The issue is this requires them to spend money and the gains will not be seen for years down the track. This means there will be a period where they will be forced to report poor growth in financial reports and this will reduce profits and means the share price will likely suffer. This may paint a bad picture of upper management and impact on their compensation.

Those who bought at the ~$24.50 level amongst all the doom and gloom and predictions of a sub $20 share price are now sitting on a ~14% gain in less than a month and a fat dividend income stream. I should have twigged onto it when mainstream newspapers were crowing that Woolies were in deep trouble and ******** customers were coming in telling us we were all going to lose our jobs, that should have been my signal to buy

I'm still holding the parcel I purchased "cum div" at $25.14. The statutory 45 days have passed so I am now entitled to the franking credit. Return per share is now $1.0285 representing a return on investment of 4.089%. Capital gain as at todays close of $27.84 is $2.70 per share or 10.74%. Total return on investment to date is 14.817%. Not bad for 47 days.

I will hold for now and wait and see the outcome of the board changes and the impact of their rewards program changes.

It looks like the "impact of their rewards program changes" is negative. The share price is down $0.50 today. Coincidently my new "Woolworths Rewards" card arrived today and I can understand why the shares were sold off. Who ever thought this program up should be taken down to one of the Woolworths outlets and be chained to the trolley rack so the customers can tell them just what they think of it. It must be one of the most poorly conceived loyalty plans, if not the worst, I have ever seen. I suspect that the back lash on this will impact badly on the share price.

nulla nulla said:

It looks like the "impact of their rewards program changes" is negative. The share price is down $0.50 today.

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Surely that's just noise...

nulla nulla said:

Coincidently my new "Woolworths Rewards" card arrived today and I can understand why the shares were sold off. Who ever thought this program up should be taken down to one of the Woolworths outlets and be chained to the trolley rack so the customers can tell them just what they think of it. It must be one of the most poorly conceived loyalty plans, if not the worst, I have ever seen. I suspect that the back lash on this will impact badly on the share price.

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What are the reasons for this view?

I am guessing (hoping) that WOW didn't come up with the revised rewards program without doing extensive customer research on the previous program. The new program changes from essentially accumulating bigger rewards to a continuous stream of smaller rewards.

I am also guessing (somewhat educated-ly - a word perhaps demonstrated that I am not that well educated) that the frequent flyers points given to member weren't free. WOW needed to pay Qantas for all those points. So perhaps re-directing those payments back into the business itself would get better bang for buck?

I can see what the new program is trying to do. It should create many smaller rewards at a much higher frequency. If a customer has $10-off on his WOW card, it will influence his decision as to where to shop. So if you can entice the customer 15 times a year with the new program vs 1-2 times a year with the existing program, you would get more foot traffic. Also, the "orange dot" program will also be a very useful stock/supplier management tool.

It remains to be seen whether it'd be successful... and you bet that if it is successful it would be copied by Coles within 6 months (and then you would buy WOW and short WES).

You could already set your rewards card to redeem wow gift vouchers automatically too though, but it ran through the frequent flier store. If you spend enough you can get at least $5 once a month. You had to set the amount you want and it impacted on frequency. I think it was 750 points for $5 and it got cheaper pro rata the higher you went. Most people shopping for other than just themselves could get a $5 card once per month. If the majority of people were doing that though wow probably thought well we could just give them rewards without frequent flier points if they just want dollars off when they shop.

nulla nulla said:

It looks like the "impact of their rewards program changes" is negative. The share price is down $0.50 today. Coincidently my new "Woolworths Rewards" card arrived today and I can understand why the shares were sold off. Who ever thought this program up should be taken down to one of the Woolworths outlets and be chained to the trolley rack so the customers can tell them just what they think of it. It must be one of the most poorly conceived loyalty plans, if not the worst, I have ever seen. I suspect that the back lash on this will impact badly on the share price.

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I'm mildly disappointed the Rewards points didn't roll over to the new loyalty program. Still, I shop Woolies because I know where the stuff is on the shelves.

Woolworths would have an incredible data base from the "Everyday Rewards" linked purchases. Evidence of this was the regular emails we would receive offering special on-line prices for items we have purchased in the past. This data base would enable Woolworths to plan logistics on a store by store basis, staffing requirements on a store by store basis, opportunities for expansion in high demand areas and also put them in a good bargaining position with their suppliers.

On the "loyalty" basis, the benefit to our household was initially the fuel discount vouchers (we presently have six which have transferred from the old card to the new card) and the loyalty points which we had opted to convert to a Woolworths $20.00 credit when enough points had accumulated. Our weekly shop (for five adults) generated around 250 points per week which converted to a $20 card every three months. Under the previous system we received "points" on the basis of the whole shop. Also under the program we would receive invitations to participate in bonus credits on a regular basis. That is, spend more than $100.00 per week for three consecutive weeks and receive a $30.00 credit (this works out to a 10% rebate). Having two cards linked, on these occasions where we both received the email, we would split the weekly shop to maximize the discount. You also received discounts on specific advertised items exclusive to you using your "Everyday Rewards " card.

Points accumulated whether you were paying full price for items or stocking up when prices were discounted. At check out the receipt printed off would advise the total points received, confirm a petrol discount voucher had been added to your card, list the savings you had made buying items on special and you might be offered beer or wine at BWS at a discount linked to total spend.

Under the new system, it appears you will only receive "Woolworths dollars" from buying specific colour coded items. The weekly Woolworths specials catalogue received yesterday, for instance has "Crumpets" at $3.10 giving $1.10 "Woolworths dollars" toward your future savings. While this reduces the price to the regular discount price of $2.00, you don't get the saving immediately. Additionally, you appear at this stage to receive a maximum of $10.00 off your next shop.

What happens to the accumulated points that were due to roll into another $20.00 before the change? What happens to the "Woolworths dollars" over and above $10.00 that you accumulate each shop? Will the "special loyalty" offers continue?

I think the change has been very poorly planned and very poorly explained to the "Everyday Rewards" members. Woolworths needs to get out there and demonstrate how shoppers will be better off. It may have cost them an arm and a leg to pay Qantas to run the program but I wonder if they will lose more in custom than they save?

nulla nulla said:

It looks like the "impact of their rewards program changes" is negative. The share price is down $0.50 today. .....

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skc said:

Surely that's just noise...

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Or maybe the "First Quarter Sales Results" were leaked??? Todays indicative open isn't looking good.

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nulla nulla said:

Or maybe the "First Quarter Sales Results" were leaked??? Todays indicative open isn't looking good.

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You'd think not with such a big drop today.

skc said:

Surely that's just noise...



What are the reasons for this view?

I am guessing (hoping) that WOW didn't come up with the revised rewards program without doing extensive customer research on the previous program. The new program changes from essentially accumulating bigger rewards to a continuous stream of smaller rewards.

I am also guessing (somewhat educated-ly - a word perhaps demonstrated that I am not that well educated) that the frequent flyers points given to member weren't free. WOW needed to pay Qantas for all those points. So perhaps re-directing those payments back into the business itself would get better bang for buck?

I can see what the new program is trying to do. It should create many smaller rewards at a much higher frequency. If a customer has $10-off on his WOW card, it will influence his decision as to where to shop. So if you can entice the customer 15 times a year with the new program vs 1-2 times a year with the existing program, you would get more foot traffic. Also, the "orange dot" program will also be a very useful stock/supplier management tool.

It remains to be seen whether it'd be successful... and you bet that if it is successful it would be copied by Coles within 6 months (and then you would buy WOW and short WES).

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I think you're on the mark. QAN was reaming their FF "partners". I heard when they had the partner restaurants it was costing restaurants up to 6% of the bill to buy the points. It's probably more interesting as to what it means for QAN's FF program. It was a real money spinner, but they've constantly been devaluing points and squeezing their partners. Considering the programs importance to QAN's profitability they need to tread carefully. I also think QAN did not see this coming, judging by the PR emails they've sent out since WOW made the announcement.

WOW its like a healthy animal that has a vampire leech on its back....and that blood-sucking leech
is called Masters - its sucking WOW coffers bone dry.

I have been to Masters stores many times and I can tell the difference between them and Bunnings.

To put it simply: Bunnings sells things what people want, while Masters sells things what Masters "think" what people will be wanting.

baby_swallow said:

WOW its like a healthy animal that has a vampire leech on its back....and that blood-sucking leech
is called Masters - its sucking WOW coffers bone dry.

I have been to Masters stores many times and I can tell the difference between them and Bunnings.

To put it simply: Bunnings sells things what people want, while Masters sells things what Masters "think" what people will be wanting.

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WOOLWORTHS SALES SLIDE AMID TOUGH COMPETITION

Food & liquor up 0.4pct to $11.1b

Petrol down 27.9pct to $1.33b

General merchandise down 7.9pct to $974m

Hotels up 3.3pct to $412m

Masters up 23.5pct to $294m

Home Timber and hardware up 17.1pct to $274m

Total group sales down 2.5pct to $15.75b

A lot of shock and awe going on, to scare the bejeezus out of mums and dads, but petrol seems to be the issue.

Masters appears to be getting a bit of traction, I would think it is the massive roll out costs, that are killing them.

https://au.news.yahoo.com/thewest/a/29941197/masters-sale-lingers-as-woolworths-bombs/

sptrawler said:

A lot of shock and awe going on, to scare the bejeezus out of mums and dads, but petrol seems to be the issue.

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And the petrol is only an issue because of a change to the accounting between WOW and Caltex, it doesn't even effect the bottom line.

I would love to tell someone at woolworths everything that is wrong with the grocery store side of things currently, but would they listen?

I may as well rant here.

First of all, it's not that cheap, implying that I am paying a premium for something. In the case of coles, which is slightly cheaper but still expensive, the premium seems to pay for clean, new/refreshed stores and friendly staff with minimal queues. My local woolworths offers none of these benefits. It's a ramshackle old dump with rude foreign staff and a long queue, even in the early morning when I want to buy 1 small thing before work.

Next, the loyalty program. I didn't bother with it so far, but now they've 'revamped' it, I am being forced to consider it against my will. I don't want to buy something just to get a mysterious 'discount' in the future, this is basically like a 'sale' (which other stores offer without any conditions attached) only I'm forced to give them personal information and wait until I meet certain conditions like spending $x before I can get my 'discount'. I don't like being forced to do things, it implies that they aren't something I actually want to do and that there is something dodgy going on. So this loyalty program makes me distrust the company subconciously. Give me an optional reward (such as spend $x over a few weeks and get $x back), don't just dress up the specials you could have offered anyway and make me work for them, as I am smarter than that.


Also, the fresh produce is disastrously non-fresh for a company that claims to excel in the freshness of their produce. The carrots turn into rubber 2 days after buying them, the bananas are so unripe I have to sit them on my desk for 3 days before they are edible, and the nuts are so expensive for the tiniest packages. Again, I only shop there because I'm too lazy to make it to the local asian grocer while they are still open.


I'm being lazy less often now. Wake up woolworths, offer something over all the companies who are cheaper and better than you now.



(I don't hold, but hell, I may trade when I think it has hit the bottom).

silence said:

Next, the loyalty program. I didn't bother with it so far, but now they've 'revamped' it, I am being forced to consider it against my will. I don't want to buy something just to get a mysterious 'discount' in the future, this is basically like a 'sale' (which other stores offer without any conditions attached) only I'm forced to give them personal information and wait until I meet certain conditions like spending $x before I can get my 'discount'. I don't like being forced to do things, it implies that they aren't something I actually want to do and that there is something dodgy going on. So this loyalty program makes me distrust the company subconciously. Give me an optional reward (such as spend $x over a few weeks and get $x back), don't just dress up the specials you could have offered anyway and make me work for them, as I am smarter than that.

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I am a member of both Coles Flybuys and Woolworths Everyday Rewards. I reckon flybuys is far better and offers better incentives and discount offers. I accumulated around $200 worth of flybuys points over the last year and right now I'm using those $$$ to buy my petrol from shell express. This $200 worth of credit I got was for doing nothing other than buying my groceries and insurance from Coles, great stuff.