Progress Against Strategic Priorities

Discuss about the Accounting Concepts and Practices for Woolworths Limited.

Woolworths Limited was started in 1924 in the Imperial Arcade in Sydney (Woolworths Limited, 2016). The entity enjoyed success as a retailer for the period that followed and even opened a new chain in New Zealand three years later. By 1939, the company had established itself to the point of creating a staff assurance scheme that sought to reward the diligent workers in the chain after they retired (Woolworths Limited, 2016). Sixteen years after its establishment, the company expanded its business such that it started expansion of its warehouses into cities such as Brisbane, Victoria, South Australia, and Tasmania. In 1957, Woolworths introduced food items into its stores (Woolworths Limited, 2016). The groceries ranged from vegetables, fresh packaged meat, and delicatessen.

The company continued to enjoy success well into the late 50s an even opened its 300^th store in Wentworth Ville, the raid expansion partly due to the firm’s acquisition of some BCC stores in Queensland (Woolworths Limited, 2016). The retail giant soon opened a supermarket, a move that led to many of its chains being converted into supermarkets. Soon enough Woolworths acquired the Northern Territory business from Centralian Traders Pty Ltd and thus effectively became the first retail chain to operate in the whole of Australia (Woolworths Limited, 2016). Later, the company increased its retail business to incorporate the sale of liquor and soon this became one trading unit of the company. In 1983 Woolworths acquired Dick Smith Electronics ad started selling a wide range of brands in electronics. 6 years later, the company was acquired by IEL (Woolworths Limited, 2016).

Overall, Woolworths Limited is a retail chain with about 3000 stores across New Zealand and Australia alone (Woolworths Limited, 2016). The company’s stores deal in products such as food, general merchandise, liquor, hotels, and home improvement (Woolworths Ltd., 2015). The company is evidently an Australian brand with more than 200,000 employees (Woolworths Ltd., 2015). The company also has many partners, and collaborates with many farmers, manufacturers, ad producers various products such as the ones that have been mentioned above.

Woolworths Limited has a business growth plan that is shaped by four key strategic priorities. These include extending the company’s share in the food and liquor sector. Another strategic priority is increasing its shareholder value by delivering on the company’s portfolio. The company also intends to build new growth businesses and create factors that would ensure more growth (Woolworths Ltd., 2015).

Significant Issues from the Chairman’s Report

The company strives to adapt to evolving customer demands and this has led to a change in how the company operates. Technology has helped the company to deliver services as demanded by the customer (Woolworths Limited, 2016). There are applications that customers use to access various products offered by the company. The business is creating options by using its websites, mobile applications, virtual stores and delivery options that support the services offered at the various stores (Lozano, 2013). Concerning the food, liquor, and petrol sectors, Woolworths continues to ensure sustainable competitive development and maintain the high return on investments from its shareholders (Woolworths Ltd., 2015).

As a result, the food and liquor sales were reported to be $42.1 billion, which represented an increase of about 2.3% as compared to the 2014 fiscal year (Woolworths Ltd., 2015). Woolworths reported deflation in its average prices of 5.2% in the fourth quarter after correcting for the effects of volumes and promotions (Woolworths Ltd., 2015). This represented a substantial increase from the 2.8% deflation it had realized in the previous fiscal year (Woolworths Ltd., 2015). The company realized this goal by speeding up its investment in affordable prices for the Australian Food customers. The normal shelf price movement index that did not include an extensive investment in price and promotional activity increased by 1.2% in the fourth quarter (Woolworths Ltd., 2015). Despite significant inflation in some categories in the fourth quarter, the shelf price increases were maintained at a low figure as the company absorbed higher cost price increases (Chandler, 2014).

The good returns in the hotel and liquor sectors can also be evidenced by the extensive investment into the liquor and hotel properties and businesses. The company has acquired several hotel and liquor premises that have contributed significantly to the company’s revenues. The Woolworths Liquor Group’s growth continued in all across formats including the Dan Murphy’s, BWS, and The Wine Quarter (Woolworths Ltd., 2015). The overall liquor sales for 2015 were $7.7 billion and this included the on premise sales of liquor for the ALH Group. This figure represented an escalation of 4.2% on the previous year (Woolworths Ltd., 2015). Woolworths also launched 30 new supermarkets and 10 new Dan Murphy’s in the fiscal year of 2015 and renovated about 58 supermarkets and 5 Dan Murphy’s (Woolworths Ltd., 2015). This was  done to allow the company to satisfy all the needs of the customers (Woolworths Ltd., 2015). The great ad encouraging results from the entertainment, sponsorships, and events were the driving force behind the company’s decision to revise its vision. Consequently, Woolworths witnessed steady rise in the sales of food and accommodation from its revamped menus (Woolworths Ltd., 2015).

In summary, the company continued to grow and increase its market gains despite the liquor market being an environment of low growth. Woolworths balanced the growth across the formats with Dan Murphy’s, BWS, and The Wine Quarter. These three reported improved results (Woolworths Ltd., 2015). In relation to customers, the company was able to engage its customers through MyDanMurphy’s, a loyalty program that has about 900,000 (Woolworths Ltd., 2015). In relation to food, the company became the first Australian retailer to sign the Australian Food & Grocery Industry Code of Conduct. This code provides greater transparency and certainty for food and grocery suppliers (Wolworths Ltd., 2015). Also, the company honored its price promise to its customers. The price promise included an investment of over $200 million in the price for the 2015 fiscal year. Internal instruments showed  price parity with its competitor Coles in June 2015 (Wolworths Ltd., 2015). The company was able to increase its sales and customer numbers after moving to invest in lower prices (Woolworths Ltd., 2015).

In the general merchandise section, Woolworths aims to make Big W into the best option for families in Australian (Woolworths Limited, 2016). To achieve this, the company has roled out a new system of merchandising that will enhance its insights into the management of trade and inventory as soft good are taking center stage (Woolworths Ltd., 2015). Consequently, Categories such as Entertainment, Toys, Books, and Womenswear, have realized an improvement in performance whereas others like Footwear and Homewares are slowly picking up despite the low results (Woolworths Ltd., 2015).

Against its strategies, the company has been able to realize significant progress with respect to clearing its non-productive inventory. This has been accomplished by using the Drop Zone campaign that has seen the company offload about 80% of this inventory with the remainder scheduled to be done before Christmas (Woolworths Ltd., 2015). The company has also been able to increase significantly the quantity of products found online to over 28,000, and an additional 8,000 customer products under research (Woolworths Ltd., 2015).

The Chairman of the board of directors, Gordon Cairns reiterated the firm’s commitment to putting the customer’s needs first and increasing the value to the shareholders (Wolworths Ltd., 2015). In line with this, he mentioned that the company had made some managerial changes that would make it easier to achieve this fete. On behalf of the Board members, Mr. Cairns announced a 1.5% increase in dividends per share to 139 cents for financial year 2015, up from 137 cents in financial year 2014 (Woolworths Ltd., 2015). The report also noted that the group sales had gone down by 0.2% to $60.7 billion (Woolworths Ltd., 2015).

Grant O’Brien, who is the managing director of Woolworths Limited, reiterates the entity’s objective of maintaining sustainable returns for all shareholders by prioritizing the customer’s needs and demands. The manager acknowledged that the company did not grow according to the financial results. The company recorded a profit, which only just surpassed the figure that was realized in the 2014 fiscal year (Woolworths Ltd., 2015). However, this was not enough to guarantee growth. The MD attributes the failure to enhance growth to the challenges posed by the market. According to Mr. O’Brien, the market environment has shifted and there is stronger competition and considerable changes in customers’ shopping behavior (Dunphy, Benn, & Griffiths, 2014).

Despite the profit report, Mr. O’Brien acknowledged that the company had increased it dividends to its shareholders (Woolworths Ltd., 2015). This increase in dividend is a good sign because it underlines the good financial health of the company. Companies that pay out higher dividend are stable, profitable, and mature in the market (Noreen, Brewer, & Garrison, 2013). The high dividends point to a high cash flow and several positive net present value investment opportunities the company has (Braun, 2012). This is true for Woolworths because the company is engaged in many investment projects that have the potential to grow its market share and competitive advantage (Shim & Siegel, 2012). For example, according to the MD’s report, the company can convert the capabilities of BIG W into results (Woolworths Ltd., 2015). Already, Woolworths has offloaded over 80 per cent of non-productive inventory, launched the Party category to its 63 stores (Woolworths Ltd., 2015). In addition, the company has increased the number of products available online to more than 28,000 (Woolworths Ltd., 2015). Additionally, the company is adding new ranges and changing the store format (Woolworths Ltd., 2015). There are 11 stores now operating in the new format and all are outperforming the original format stores. Brands such as Sherwin-Williams, Loctite, and Honda that deal in paint, adhesives, and mowers respectively were due to be launched before the end of the 2015 calendar year (Woolworths Ltd., 2015).

Woolworths is a huge employer particularly in the private sector making it a crucial contributor to the economy. Woolworths has pumped almost $36 million into community programs in conjunction with its partners in New Zealand besides Australia (Wolworths Ltd., 2015). These humanitarian efforts have largely been focused on providing aid to Australians experiencing natural disasters (Wolworths Ltd., 2015). Since 2010, working with our customers, the company has contributed over $28 million to The Salvation Army (Wolworths Ltd., 2015)

The workforce at Woolworths implies that the retailer supports and values diversity and strives to create a vibrant and all-round workforce (Kline & Odenthal, 1999). Women account for over half of the company’s workforce and the retailer is intent on improving their representation in the higher executive and management roles (Wolworths Ltd., 2015). Women occupy about 39% of the managerial roles in in Woolworths with many of them involved in operations (Wolworths Ltd., 2015). An increase in female representation is instrumental in enhancing the gender equality in management for the company (McWilliams & Siegel, 2001). The Reconciliation Action Plan commits Woolworths Limited to bridge the gap between indigenous and non-indigenous Australians by way of strategies in employment (Wolworths Ltd., 2015). As a member of the Business Indigenous Network, Woolworths continues to be involved in coordinating and creating opportunities to increase the participation of indigenous people in work (Reilly & Brown, 2015).

The company’s major achievements in the past year include:

Achieving a commendable reduction of 42% for carbon emissions from facilities in areas with potential for growth (Wolworths Ltd., 2015)

Enforcement of fundamental policies and guidelines on ethical sourcing, sea food, timber, and animal welfare.

The company has not achieved its target in waste management, particularly food waste but remains committed to reducing waste.

References

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