Woolworths pulls back full-year earnings outlook as customer nerves show while Middle East war drags on

Woolworths says it has so far weathered the oil price storm fuelled by war in the Middle East but warns there are early signs customers are turning more cautious and suppliers are facing increased inflationary pressures.

The grocery giant has also moved to rein in earnings expectations for the full financial year amid the clouded outlook as it aims to keep a lid on prices and lure less-confident shoppers through the doors.

Chief executive Amanda Bardwell said the prolonged stand-off between the US and Iran after attacks began on February 28 was creating greater uncertainty for customers, suppliers and staff at a time when cost-of-living pressures are already acute.

“While the impact on the group to date has been limited, higher fuel costs and secondary effects are likely to have an increasing inflationary impact as we move through the calendar year,” Ms Bardwell said.

“Our primary focus since March has been to take the necessary steps across the group to minimise the impact on customers, while also recognising the genuine cost pressures being felt by our suppliers and transport partners.”

The subdued outlook marred what was an otherwise stunning third quarter for grocery giant, which on Thursday reported group sales revenue of $18.1 billion for the three months to the end of March.

Australian food sales soared 5.9 per cent, contributing $13.83b to that total. Sales for March and April alone — which takes in Easter and Anzac Day breaks — jumped 5.4 per cent.

Overall group sales — which includes Woolworths’ floundering New Zealand food business and discount department store chain Big W — rose 4.5 per cent, despite the impact of two interest rate hikes from the Reserve Bank so far this year and the onset of the Middle East conflict in the final month of the quarter.

Woolworths warned that while earnings growth in its Australian food business was still expected to be in the mid to high single digits for the year to the end of June, it would not reach the upper end of its previous forecast range.

“This reflects incremental costs associated with direct fuel exposures in Q4 as well as investments to support customers in managing their budgets in a period of rising inflation including the Price Freeze announced today,” it said.

Woolworths said 300 popular branded or exclusive products — including eggs, bread, chicken, sausages, pasta, and nappies — would be covered by the Price Freeze campaign from Friday for the next three months.

The products will include: Woolworths’ branded hot roast chicken; soft bread 650g and 700g range; cage free eggs XL 12 pack 700g; RSPCA chicken breast fillets regular and bulk packs; pork sausages 10 pack 550g and thin beef sausages 10 pack 550g; pasta 500g range; frozen mixed berries 1kg and 500g packs; Little One’s nappy range; Vevelle luxury soft toilet tissue 3ply 24 pack; and Essentials facial tissues white 2ply 224 pack.

Ms Bardwell said families were facing renewed budget pressures from higher interest rates, elevated fuel prices and global uncertainty.

“We know we need to strike the right balance for everyone who relies on Woolworths,” she said.

“We’re committed to doing the right thing for our customers, our team, transport partners and especially our Aussie farmers who are facing rising fuel, fertiliser and packaging costs.

“We will continue to work closely, and fairly, with all our suppliers to navigate the months ahead. We want to support our suppliers where we can so they can operate sustainably as their costs rise, while we do our part to provide stability and value at the checkout for our shared customers.”

At Big W, sales grew 3.9 per cent to just over $1b in the third quarter, led by clothing and toys which offset the impact of cycling several strong product launches across tech and gaming in the previous year.