Woolworths shares plunge as value-conscious shoppers hit profits

Woolworths shares have taken a hit after the retailer flagged a reduced first half profit as value-conscious shoppers sought out cheaper groceries amid rising cost-of-living pressures.

Disclosing a 4.5 per cent rise in first-quarter sales, the country’s biggest supermarket chain warned that earnings from its Australian grocery business were expected to come in under expectations.

Hosting her first quarterly sales results, new Woolworths chief executive Amanda Bardwell said that while a boost was expected from the key Christmas trading period, December-half profit before interest and tax was now tipped to fall to between $1.48 billion and $1.53 billion from the $1.59b recorded for the same period last year..

“We are pleased with the trading momentum in the lead-up to the important Christmas trading period, however, we expect the environment for the 2025 financial year to remain challenging,” Ms Bardwell said.

Woolworths shares tumbled to a five-month low, trading 5.3 per cent lower at $31.06 as at 9am.

Ms Bardwell said customers remained highly conscious of value and continued to buy down for specials or chase lower-price items, particularly Woolworths’ home brand products.

“As we focused on delivering more value to our customers during the quarter and building sales momentum, promotional activity … increased as customers responded strongly to specials and, in particular, larger savings,” Woolworths chief executive Amanda Bardwell said.

“While this has contributed to improved sales momentum, it has also led to a lower margin sales mix.

“Additionally, eCommerce growth has remained stronger than anticipated in the quarter which has also impacted margins.

With the big supermarket groups trying to rebuild customer trust in the face of regulatory scrutiny and political pressure to reduce food prices, Woolworths said its prices fell 0.3 per cent during the quarter. Excluding tobacco, and fruit and vegetables, prices were 1.8 per cent lower.

Meat prices fell, as did prices for freezer and pantry items.

Total sales for the group rose to $18b from $17.2b for the same quarter a year ago, with Australian food sales growing 3.8 per cent to $13.6b.

The pursuit of cheaper prices was reflected in the 6 per cent jump in sales of own and exclusive brands.

Online sales leapt 21.8 per cent to $2.6b, including 22.8 per cent growth in Australian food sales to $2.3b.

Discount retailer Big W’s slipped, with sales 0.9 per cent lower at $1.21b. When included with Petstock, bought in January, sales for the new W Living division were $1.36b.

Woolworths and Coles are being sued in the Federal Court by the Australian Competition and Consumer Commission, which claims the supermarket giants misled shoppers with “illusory” discounts on hundreds of common grocery products.

The claims involve 266 products for Woolworths at different times across 20 months, and 245 products for Coles at different times across 15 months, amounting to “tens of millions” in sales from which both chains “derived significant revenue”, the ACCC said.