NZ in clear as 1200 Woolworths jobs axed

Chief executive of Woolworths Australia Grant O'Brien announced he is stepping down from the supermarket giant, as are 1200 unwitting staff members. Image: Getty.

Woolworths chief executive Grant O'Brien has announced his departure from the supermarket giant as the retailer downgraded its profit guidance and announced it would axe 1200 jobs.

O'Brien said he was stepping down from the Australian supermarket chain after less than four years in his position following a "disappointing" performance from the retailer, which is under pressure from rivals Coles and Aldi.

Woolworths is the parent company of New Zealand supermarket operator Countdown.

But a Countdown spokesman said the job cuts were confined to Woolworths and would not affect New Zealand.

Woolworths also said its efforts to turnaround its flagging performance and cut costs would see around 1200 jobs go, up from the 400 job losses announced in May.

The supermarket chain also warned its full year profit would be around AU$300 million lower than a year ago due to weak sales growth and AU$270 million in transformation costs.

It now expects to post a full year profit of AU$2.15 billion, down from AU$2.45 billion last year.

O'Brien, who has been chief executive since October 2011, said he told chairman Ralph Waters he would retire pending the appointment of a replacement.

"The recent performance has been disappointing and below expectations," O'Brien said in a statement on Wednesday.

"I believe it is in the best interests of the company for new leadership to see these plans to fruition.

"I approached the chairman and expressed to him that I am committed to a smooth transition to a new CEO and wanted to give the board sufficient time to consider its options."

Woolworths has launched a global search for a successor.

Mr O'Brien said there had been no improvement in Woolworths' performance in recent months despite a $500 million program to cut costs, lower prices and improve service for customers.

Comparable sales were up just 0.7 per cent in May and June.

By comparison, rival Coles lifted comparable sales 3.8 per cent in its most recent quarter.

Woolworths has endured several years of sliding sales growth due to intense competition from Coles and no frills German retailer Aldi.

Mr O'Brien said the company was on track to beat its target of $500 million in savings and said the supermarket's prices were now the most competitive they have been in more than a year.

But he said it would take time for the three-year strategy to yield results.

"We have been very transparent about the key challenges and opportunities for growth for each of our businesses, including setting out detailed plans at our recent investor day to win back sales momentum within our Australian Food business," he said.

"It will take time for the improvements we have made to convert into sales momentum."

O'Brien also said comparable sales from Woolworths subsidiary Big W slumped 12.1 per cent during May and June due to the launch of a new merchandising system.

"The launch of the new system created stock availability issues in our stores, which in turn has impacted sales," he said.

Meanwhile, sales from its home improvement division, which includes Home Timber and Hardware and Masters were up 19.8 per cent.

- AAP