Supermarket giant Woolworths, faces continued criticism following its decision to cease Australia Day merchandise sales.

CEO Brad Banducci defended the move in a leaked letter to staff, expressing regret for the backlash received.

Banducci claimed that the decision is not an attempt to "cancel" Australia Day but is based on declining merchandise sales, dropping below $1000 per supermarket.

However, the leaked letter outlined engagement with the Australia Day Council and Aboriginal and Torres Strait Islander representatives to 'understand the evolving meaning of January 26.'

Banducci defended the display of banners for Diwali and Lunar New Year, offering the bizarre excuse that the corporate giant had a commitment to supporting diverse celebrations centred around connection over food.

Online backlash ensued, with critics calling the South African born CEO "out of touch" and labelling the letter as "failed damage control" with many pointing out that Australia Day also has a strong association with food.

READ THE LETTER: