Woolworths, Australia’s largest supermarket chain, has lowered its earnings forecast for the first half of the 2025 financial year, citing cost-of-living pressures that are leading customers to seek out more discounts and promotions. This trend, while boosting sales volumes, has pressured the retailer’s margins, impacting its bottom line.
Following the announcement, Woolworths’ shares dropped nearly 6 percent to $30.96 in morning trade.
Woolworths’ CEO Amanda Barwell noted that food inflation in both Australia and New Zealand has moderated for the third consecutive quarter, with the average prices in quarter one lower than the prior year. Despite modest inflation returning to fruits and vegetables, the demand for lower-priced options has been consistent.
“Customers are under real financial pressure,” Ms. Barwell said, explaining that Woolworths has responded by increasing specials, boosting shelf space for more affordable own-brand items, and offering extra savings through Everyday Rewards. The popular Disney Worlds of Wonder collectibles campaign also aimed to bring “a little joy to families.”
Ms. Barwell, just seven weeks into her role, also faces an ACCC investigation into alleged fake discounts. She announced a slight dip in Woolworths’ first-half growth rate from 3.3 percent to 3 percent in October. The retailer’s revised earnings forecast for the first half of 2025 now sits between $1.48 billion and $1.53 billion, a decrease from $1.595 billion in the same period in 2024.
Woolworths’ sales for the first quarter totaled $18 billion, a 4.5 percent increase from the same period last year. Australian food sales rose by 3.8 percent to $13.6 billion, and eCommerce sales surged by 21.1 percent to $2.4 billion. Ms. Barwell attributed much of this growth to a stronger focus on value, noting that customers are increasingly purchasing items on special or choosing lower-priced options, including Woolworths’ own-brand products.
“Customers remain highly value-conscious,” she added. “These competitive factors, together with strong eCommerce growth, are leading to a lower-margin sales mix which has impacted earnings.” Woolworths expects further insights into the impact of these factors as the second quarter unfolds.
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