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

Woolworths shares have been hammered after the grocer warned full-year earnings at its Australian supermarkets would be hurt by higher fuel costs and a decision to freeze prices on hundreds of items.

The stock closed down 7.8 per cent to $34.39 on Thursday, with the contagion spreading to rival Coles, which fell 3.6 per cent to $22.11.

Ms Bardwell said while earnings growth at the Australian food division 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 direct fuel costs in (the fourth quarter), as well as investments to support our customers in a period of rising inflation,” Ms Bardwell told media on a call as she unveiled Woolworths’ third quarter sales result.

“We run thousands of trucks every single day across the country, whether it’s our large fleet servicing from our distribution centres into our stores, or whether it’s the tens of thousands of orders that we’re delivering direct from our stores to our customer’s door. And so we too are exposed to those increased fuel costs.

“We’ve been very mindful of continuing to optimise our fleet so that for us is about maximising utilisation of each one of those vehicles.”

Ms Bardwell said the price freeze on hundreds of products — including eggs, bread, chicken, sausages, pasta, and nappies — for the next three months was part of its efforts to be more open with customers about price rises.

“In our conversations with customers, what they’ve been asking from us is, ‘Give us more certainty’ . . . hence why we’ve taken the action today to say we’ll freeze the prices on 300 of our own brand and exclusive products,” she said.

“We’ve learned from the last inflation cycle. This time, we’ll be more upfront and transparent with our customers about where prices are rising and why.”

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

Australian food sales rose 5.9 per cent, contributing $13.83b to the total revenue. 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 Iran war in the final month of the quarter. This beat consensus by 60 basis points.

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.

RBC Capital Markets analyst Michael Toner said Woolworths’ profit downgrade was “somewhat surprising” after it lifted its guidance in February.

“We view the result as soft on balance in the context of strong share price performance up almost 27 per cent since the beginning of 2026,” Mr Toner said.

Ms Bardwell said it was too early to predict with any certainty the direct and indirect impacts on the 2027 financial year from the Middle East conflict and how this would impact customer shopping behaviours.

“We are seeing early signs that the conflict in the Middle East is impacting our customers and team, many of whom were already experiencing significant cost-of-living pressures,” she 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.

Woolworths results came as the eight-day hearing on whether the supermarket misled customers with sham discounts is set to wrap up on Friday.

The Australian Competition and Consumer Commission alleged Woolworths systematically jacked up prices on everyday items, before offering discounts at prices higher or equal to the original shelf life. The court heard Coles’ defence against the allegations in February.

Ms Bardwell on Thursday said it was confident the supermarket acted in the interests of its customers, but did not comment further on the court case.

It came a day after Aldi, Australia’s third biggest supermarket, revealed weaker sales growth and a profit drop in 2025 amid a renewed supermarket price war.

Coles is set to release its latest quarterly results on Friday.