Brad Banducci has steered Woolworths' core supermarket business back from the brink but neglected problem child Big W is spoiling the company's transformation story.
One of the highlights of Woolworths's full-year results was stellar same-store sales growth in the fourth quarter which confirms the battle with Coles is going well.
Woolworths is no longer the underdog in the supermarket wars after investing $1 billion into prices and service and winning back market share from its rival.
Like-for-like sales in the June quarter rose 6.4 per cent which compares with a 0.7 per cent fall for Coles. Second-half earnings for the Australian food business also rose 13 per cent, further evidence the recovery is gaining momentum.
The problem for Banducci is that he inherited so many problems at Woolworths when he became chief executive in February last year that he could not fix them all at once.
Distracted by the exit from loss-making Masters and efforts to revive its core supermarkets business, Woolworths is belatedly turning its focus to Big W which former Perpetual and 452 Capital money manager Peter Morgan has called a "basket case".
Big W posted a worse-than-expected loss before interest and tax of $150.5 million for the year. The latest in a string of executives brought in to fix the business is David Walker who had been acting in the role since November.
The pressure will be on Walker to outlast his predecessors and prove the doomsayers who do not believe the third turnaround plan for the business in just four years will deliver results.
Former Big W boss Sally Macdonald resigned in November after less than a year in the job. She replaced Alistair McGeorge who quit unexpectedly in 2015.
Woolworths has made it clear it needs to fix the business before cutting it loose. It plans to invest in Big W and does not expect a reduction in losses this year.
The Big W result took the shine off the turnaround in supermarkets. Underlying net profit fell 3.6 per cent to $1.42 billion and EBIT slipped to $2.32 billion which was slightly below what the market was expecting.
The net profit of $1.53 billion compared to a loss of $1.23 billion a year ago due to asset impairments and restructuring costs when Banducci did the heavy lifting.
Woolworths says it is accelerating digital growth and improving customer home delivery although anecdotal evidence based on customers Chanticleer has spoken to suggests otherwise.
Banducci has done a good job rebuilding the business which lost its way under his predecessor.
His message is that the company has moved from "turnaround to transformation" but Big W and new competitors gate crashing the Woolworths-Coles duopoly mean investors should be wary.
