Investing in automation, Woolworths forecast reduced earnings for FY20. The automation investments together with costs of underpayment remediation and the Endeavour Group restructure amounting to $591 million have impacted the group’s earnings.
The leading retailer revealed the total cost of remediation is expected to be approximately $390 million (excluding interest and other costs).
Back in February, Woolworths stated the underpayments bill could be about $315mn while law firm Adero Law had estimated the underpayment costs above $600mn.
CEO Banducci said, “The Group remains committed to fully rectifying any payment shortfalls across all Group businesses as quickly as possible.”
The Endeavour group restructure alone has cost the group about $230 million. Although the board decided to defer the separation due to COVID-19 impact, the estimated cost of transformation and separation remains high.
Also read: Etsy introduces Augmented Reality for Online Shopping
Technology Investments
Woolworths Group is expected to invest $700 – $780 million in technology and fit-out of the two distribution centres over the next four years even as costs of redundancies and underpayment mount.
The investment is expected to deliver a significant reduction in the Group’s supply chain costs over time, said Woolworths in a news release. The group expects the investments in automation to transform the way it serves grocery customers in NSW.
Also read: Gartner forecasts IT Spending will decline by 8% even as Cloud Services spending set to increase
Automation will allow the creation of aisle-specific pallets by store and result in better on-shelf availability for customers.
Woolworths Group CEO, Brad Banducci
For the financial year 2020, Woolies expects to report EBIT of $3,200 – $3,250 million with strong Q4 sales. Full-year results are scheduled for 27 August 2020.
Earlier this year, Woolworths announced its digital traffic continued to grow at over 50% through “personalised, effortless and connected customer experiences”. The supermarket giant quoted the example of ‘track my order’ feature introduced on Woolies X, enabling customers to track their order in real-time via the Woolworths app.
Also read: Flipkart launches voice assistant for a natural shopping experience
Australian Retailers Investing in digital transformation
Wesfarmers group MD Rob Scott credited investments in digital transformation for the growth in the group’s retail businesses. Powered by the growth of Officeworks and Bunnings, Wesfarmers group reported a 60 per cent increase in online sales year to date.
Bunnings recorded over 19 per cent growth in the second half compared to 5.8 per cent in the first half. Officeworks clocked over 27 per cent growth against 11.5 per cent growth in the first half.
Sales growth reflects the significant investments across the Group in respective e-commerce capabilities in recent years as well as greater customer preference for shopping online during COVID-19.
Rob Scott, MD Wesfarmers
Kmart hired former Amazon VP to lead its online marketplace Catch while Coles group created a new position leading Coles eCommerce reporting into CEO Steven Cain and recruited former Walmart VP Ben Hassing to lead its new division.
IGA recently launched its eCommerce offer taking the digital plunge.
Queensland based Super Retail Group raised $203 million to fund eCommerce initiatives even as Kogan raised $100 million targeting potential acquisitions demonstrating investor confidence in the eCommerce imperative.
Also read:
