Aldi, Amazon, Big W and booze: 10 things we learned from Woolworths’ AGM after a “disappointing” year

At Woolworths’ annual general meeting in 2015, chairman Gordon Cairns apologised to shareholders for the retail giant’s “disappointing performance”, and at Thursday’s 2016 meeting the management team thanked stakeholders and customers for their patience after the first year of a major strategic turnaround.

The business has no shortage of moving parts and has had a very eventful year. Woolworths posted a $1.23 billion loss in the 2016 financial year, got a new chief executive in Brad Banducci, exited its home improvement business and liquidators embarked on a months-long wind down of the Masters business.

In the past fortnight, Woolworths experienced the loss of another key team member with Big W chief executive Sally MacDonald resigning from the position after less than a year in the role.

Management cite no shortage of challenges, so what are the key themes of the strategy going forward? Here are 10 things we learned from yesterday’s meeting.

Read more: How Woolworths’ “phantom brands” aim to capture customers wanting quality

1. Management team are disappointed, but hopeful

The leadership team were open in their acknowledgement that people have been disappointed by the performance of the Woolworths business, and that includes customers, staff, suppliers and stakeholders.

However, chief executive Brad Banducci said the team is seeing gradual improvements the attitudes of customers and staff towards the business.

“Thank you for your support and patience,” Banducci told the meeting, encouraging people to go in store to see the changes being made.

2. Trust was the issue

Along with disappointing shareholders with the result, Cairns pinpointed that customers lost trust in the Woolies product, and that was a time consuming thing to repair.

“It’s very easy to lose it but very difficult to get it back. That’s why it will take three to five years,” he said.

Trust and community engagement formed a big part of the presentation all up – with the retailer keen to spruik its connections to charities reducing food waste, that its management team is now 39% female, and its continued efforts to support the LGBTI community and promote indigenous employment through the company.

3. Woolworths Rewards is back on track

One of the company’s major PR challenges over the past 12 months was changing of the Woolworths Rewards program – a move the company backtracked on quickly after changes to the program caused sustained customer outrage. The decision to revise the program is emblematic of the lessons the company is learning, says Banducci.

“We got it wrong but we listened to our customers and acted accordingly,” he said.

4. It was upsetting to not find a buyer for Masters

The Masters exit was a costly disappointment to the brand, and the complex process has played out publicly. Management expressed regret that they could not sell the business as a going concern, although its Home Timber and Hardware business was sold to Metcash in October.

A number of Masters employees still face uncertain work futures this Christmas, with the chain slated to close on December 11. However, Woolworths management stated “over 3,600 people have elected to participate in [the] redeployment process” that the company promised staff.

Read more: Masters employees speak out about “aggressive” customer behaviour and “brutal” conditions of fire sale

5. Big W remains a worry

The retail giant is still trying to find solutions for the Big W business after it posted a $14.9 million loss in 2016 – and with Sally Macdonald “regrettably” resigning as chief executive earlier this month, management took time at the meeting to thank her for her contribution to the ongoing overhaul of the discount department store.

Big W will now be steered by David Walker, who was the chief executive of Woolworths’ home improvement brands between February at the company’s exit in August. He will serve as “acting CEO” of the company

On what comes next, it seems that all elements of the Big W business are up for a reboot, from suppliers and product lines to cost reduction and business simplification. Big W’s best performers in 2016 were kids’ books, toys and party supplies, with Woolworths observing a big issue was “a winter fashion range that did not resonate with our customers”.

6. Aldi caught everyone by surprise 

Woolworths was criticised over the past year for increasing product prices to meet targets at a time when the likes of German discounter Aldi were seen to be stealing market share in a “race to the bottom” – and this was something that was acknowledged at the meeting.

Cairns even suggested the team hadn’t taken the threat of Aldi seriously enough, reports Fairfax.

7. There’s an Amazon taskforce in place

There seems to be a report a minute that Amazon has concrete plans to enter the Australian grocery market, and this is something Woolworths executive team is watching closely. Over the past year a special unit has been put in place to monitor the threats, according to The Australian.

8. Booze could be a saviour

One of Woolworths’ top five priorities for the major turnaround involves drinks. The Endeavour Drinks Group, which includes Dan Murphy’s and BWS, was one of the only shining lights in 2016, after it was able to increase its earnings before interest and tax (EBIT) by 3% for the year.

It now generates around $484 million a year, and the customer database is a significant driver of these sales; in 2016 Dan Murphy’s had 1.7 million members, and the plan going forward is to open new stores each year, as well as reviewing the online offering.

9. Ezibuy and petrol are still being shopped around

The Masters chapter might be closed, but there are still other pieces of the Woolies puzzle to work with – the company remains on the lookout for a buyer for online retailer Ezibuy after it was spun out from Big W. Then there’s the Woolworths’ petrol business, for which Caltex has been floated as a potential buyer over the past few months.

“As reported to the ASX, we are also reviewing the sale of our petrol business, while also looking to expand our convenience store offering,” Cairns said.

10. The business is trying a “culture change”

After years of difficult retail conditions, Woolworths wants to build itself back up into a brand that people actually like. Management have spruiked better results on its annual “Voice of Customers” surveys and say that they’re even making process on the attitudes of suppliers, although they acknowledge that they’re improving this “from a low base”.

The priorities also include building up staff’s esteem for the brand.

“We employ over 200,000 people who serve 29 million customers a week,” Banducci says.

“We have an extraordinary team who have worked hard for our customers in a difficult time.”