Company Reports

Woolworths' underlying NPAT increased by 15% to AUD 1.6 billion in fiscal 2026. Its Australian supermarkets performed strongly. Price cuts accelerated food sales momentum over the year, carrying into fiscal 2027. A pronounced turnaround at discount department store Big W boosted profits.

Woolworths is one of Australia's largest retailing groups, operating supermarkets and discount department stores. Its market capitalization is around AUD 35 billion, with annual sales of around AUD 70 billion.

Woolworths' third-quarter fiscal 2026 core supermarket sales rose 6% on last year. But rising fuel costs due to the Middle East war are likely to increasingly weigh on near-term profits. Management no longer expects to hit the upper end of its fiscal 2026 supermarket guidance range. Shares fell 8%.

In the first half of fiscal 2026, Woolworths' underlying NPAT increased 16% to AUD 859 million year on year. At its core supermarkets business, sales momentum is accelerating sharply after a period of relative underperformance. The dividend per share is up 15% to AUD 0.45. Shares rallied over 10%.

Woolworths is one of Australia's largest retailing groups, operating supermarkets and discount department stores. Its market capitalization is around AUD 35 billion, with annual sales of around AUD 70 billion.

Woolworths' first-quarter sales performance missed its growth aspirations. Sales in the core Australian food business grew only 2% from last year. Within the Australian and New Zealand supermarket segments, online sales are driving virtually all the sales growth.

Woolworths' underlying NPAT collapsed by 17% in fiscal 2025. In the core supermarkets business, rising wages, industrial action, elevated supply chain costs, and price cuts weighed heavily on EBIT, which fell 11% on a normalized basis. The smaller Big W and New Zealand businesses also disappointed.

Woolworths is one of Australia's largest retailing groups, operating supermarkets and discount department stores. Its market capitalization is around AUD 35 billion, with annual sales of around AUD 70 billion.

Household incomes are growing in real terms after a period of rampant inflation. With inflation back within the Reserve Bank of Australia’s target range, the focus is shifting to keeping the job market in good shape. Monetary settings are slightly restrictive, providing room for more easing.

Woolworths' March-quarter 2025 sales growth at its core Australian supermarkets is broadly in line with its key Australian competitor, Coles. In the previous quarter, its sales growth significantly underperformed Coles because strikes at some warehouses restricted stock on its shelves.

Tariffs are softening Australian consumer sentiment and investors are preferring defensive over cyclical retailers. Since sweeping US tariffs were announced April 2, our Morningstar Australia Consumer Defensive Index is up 3%, but the Morningstar Australia Consumer Cyclical Index is flat.

US President Donald Trump's "liberation day" tariffs have rattled global markets. Tariff rates have been raised to levels not seen in a century, which will likely set in motion a cascade of supply-demand side shocks, all acting to weigh on the rate of economic growth.

Woolworths is one of Australia's largest retailing groups, operating supermarkets and discount department stores. Its market capitalization is around AUD 40 billion, with annual sales of around AUD 70 billion.

In Australian supermarkets, Woolworths outperforms Coles on key metrics, including operating margins, returns on invested capital, and market share. Woolworths is also the owner-operator of its fast-growing online channel, while Coles partially outsources picking-and-packing to Ocado.

Woolworths is cutting prices at supermarkets, while operating costs are still rising ahead of sales growth. Despite sales lifting 4%, these margin crunching effects, together with one-off industrial action, saw net profit before tax collapse 21% to AUD 730 million in the first half of fiscal 2025.

Woolworths is one of Australia's largest retailing groups, operating supermarkets and discount department stores. Its market capitalization is around AUD 40 billion, with annual sales of around AUD 70 billion.

Retail spending is rebounding due to a larger workforce, higher wages, and meaningful fiscal stimulus. Discretionary categories are benefiting more than defensives from rising household incomes. But online growth is diluting supermarket profit margins.

Consumers are seeking savings, and supermarkets are offering more promotions. Woolworths' average shelf prices fell for the third consecutive quarter in the September-2024 quarter. In this cyclically soft retailing environment, and with e-commerce on the rise, profit margins are hurting.

Trading momentum for nonessential goods is picking up. So far in fiscal 2025, sales growth is improving at Super Retail’s chains and Woolworths’ Big W discount department stores, as well as at electronics goods retailers JB Hi-Fi, Harvey Norman, and Kogan.

A challenging trading environment took its toll on narrow-moat Woolworths in fiscal 2024. Group earnings declined 1% on the previous corresponding period, or PCP. Fiscal 2024 net profit after tax of AUD 1.7 billion was in line with our estimate, and our earnings forecasts are mostly unchanged. We lift our fair value estimate by 4% to AUD 28.50, largely reflecting the time value of money. Shares screen as overvalued. We believe a P/E of 26 at current prices and based on our fiscal 2025 earnings estimate is too expensive for a relatively low-growth, defensive yield stock. We forecast a five-year EPS CAGR of 5%.