Supermarket giant Woolworths will shed an extra 400 jobs and try to match competitor Aldi's prices to turnaround sluggish sales growth.
Woolworths unveiled a three-year growth strategy to analysts on Wednesday after posting a disappointing 2.3 per cent rise in food and liquor sales during the third quarter.
The result lags behind Coles' 5.4 per cent increase in third-quarter food and liquor sales.
Woolworths' total sales fell 1.6 per cent to $14.96 billion during the quarter, weighed down by weakness at its Big W chain and lower petrol profits following the slide in oil prices and changes to its alliance with Caltex.
The retailer has announced that it will shed an extra 400 jobs as it "turbocharges" its `Lean Retail' model designed to save $500 million in costs during the 2015/16 financial year.
The company has already axed about 400 full-time positions from its back office operations since July last year.
It's three-year growth plan includes reducing costs to counter low food inflation, cheaper items, new food and liquor store formats and increasing market share.
New food and liquor director Brad Banducci says lowering prices of its own brands will play a key role in neutralising chief rival Coles and containing Aldi when it comes to prices.
"As for pricing, Aldi brands are seen as on par or better than Woolworth's Select and Home brands; that's the customer's perception and needs to be addressed," he said.
"We have done a review of what is happening globally with own brands and we'll be working through it."
Analysts expressed concern during the meeting that Woolworths had increased prices to grow profits in the past few years while its competitors gained ground with lower prices.
Mr Banducci told them that he was focused on the future and repeated chief executive Grant O'Brien's mantra that Woolworths would not be beaten on price.
"We are not going to be beaten on price when it comes to our major competitor (Coles), and we're going to provide an equivalent to an Aldi shopping experience," he said.
Elsewhere in the business, sales from Big W were down 5.7 per cent, after adjusting for Easter, to $907 million for the quarter, while petrol sales slumped 35 per cent to $1.18 billion.
Woolworths rattled investors in February when it warned its profit growth for the year would be weaker than previously expected.
The company said at the time it expected its full year profit increase to be towards the lower end of the 1.8 per cent to 6.6 per range forecast by analysts.
Mr O'Brien said sales had improved in February and March as it stepped up investment in its supermarket business, though April had been weaker.
Shares in Woolworths were down $1.49, or 5 per cent, at $28.14.
WOOLWORTHS SALES DISAPPOINT:
* Total third quarter retail sales down 1.6pct to $14.96b
* Food and liquor up 2.3pct to $10.6b
* Home improvement up 21.7pct to $455m
* Big box hardware business Masters up 21.2pct to $217m
* Home Timber & Hardware up 22.1pct to $238m
* Hotels sales up 0.6pct to $359m
* Petrol sales down 35.2pct to $1.2 billion
* General merchandise (including Big W) down 2.1pct to $907m
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