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UPDATE 2-Australia's Woolworths fails to impress with April showing over Coles

(Recasts with shares, CEO and analyst comment)

April 29 (Reuters) - Australia’s biggest supermarket chain Woolworths Group on Thursday offered a less upbeat reading of sales so far in April than rival Coles Group as shopping patterns return to pre-pandemic levels, sending its shares lower.

Coles, Australia’s No. 2 grocer, had said in a quarterly trading update a day earlier that grocery sales since the start of April were up 4%, but Woolworths called conditions “volatile” and with sales “broadly flat”.

Shares of Woolworths slid 3.6% - its sharpest fall in nearly two months - while Coles shot nearly 5% higher.

The 97-year-old company said its plans to separate its drinks and hospitality business, Endeavour Group, remains on schedule for June.

“It’s very volatile out there,” Chief Executive Officer Brad Banducci said on a media call.

“The underlying trendline seems a reversion to a more normal shopping pattern. As to the actual number, it’s very hard to call it right now,” he added, referring to the fourth quarter, which ends in June.

Sales growth at the drinks and hotels business as well as department store BIG W helped offset declines at its foods business in Australia and New Zealand that had seen a strong quarter in the early days of the pandemic due to panic buying.

It expects sales across its businesses to decline in the current quarter, except hotels, which had taken a hit during the lockdowns last year.

Woolworths “should benefit from COVID costs reducing, Hotels ramping up and the EDG demerger but sales outperformance may be slowing faster than we hoped,” analysts at Jefferies wrote in client note after the results.

Group sales edged 0.4% higher to A$16.57 billion ($12.92 billion) in the three months to April 4, with e-commerce sales proving a bright spot, accounting for around 8% of sales in Australia.

$1 = 1.2822 Australian dollars Reporting by Nikhil Kurian Nainan in Bengaluru and Byron Kaye in Sydney; Editing by Arun Koyyur and Sam Holmes

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