‘Lost their way’: Investors lose confidence in Woolworths as profits, shares tank

Woolworths is losing confidence among investors that it can maintain its crown as Australia’s leading supermarket after reporting a 17 per cent plunge in full-year profits, the result of a horror year marred by striking workers, supply chain problems that ensued for months, and discount department store Big W’s consistent losses.

Shareholders dumped the stock, sending Woolies’ share price down 14.7 per cent as its Australian food business, the heart of the company, grew sales by just 3.1 per cent to $51.45 billion in fiscal 2025. Under pressure to repair its reputation after being accused of profiteering during the cost-of-living crisis, Woolworths’ profit margins shrank as it absorbed rising supplier prices instead of passing them on to customers, who traded down to cheaper home brands and promotions.

“Clearly it has been a challenging year up front,” said chief executive Amanda Bardwell as she presented the results for the year ended June 30 on Wednesday morning. “I want to say that we are not satisfied with our financial performance. Our results were below our expectations.”

Over the year, the supermarket lowered prices, increased the number of items on special, absorbed cost increases and made pricing easier to understand, she said. Except for tobacco, grocery prices at the supermarket have fallen for six consecutive quarters, with the company saying it is focusing on value for money and product availability.

“Customers were clearly sending us the message that they were looking for more value. And what we have recognised is that we had an opportunity to move faster,” Bardwell said.

Woolworths’ results signal a widening gulf between the supermarket giant and its smaller rival, Coles, which pleased shareholders yesterday after improving on availability, value for money and customer experience while slashing costs. Woolworths’ national footprint is more than 2200 stores, while Coles operates about 1800, including Liquorland outlets.

Meanwhile, Bardwell said execution was a key focus for the new financial year, with a focus on improving availability and getting customers in and out of stores more quickly. Where Coles has made progress in stemming theft, Woolworths appears to be losing more groceries to thieves and plans to roll out anti-theft technology such as exit gates and trolley locks.

“In the second half we did see stock loss accelerate and move to levels we have not seen for some time,” Bardwell told investors. “I’m pleased to say those actions are actually seeing positive results, and we’ll continue to be upgrading many more stores as we go forward.”

Ten Cap lead portfolio manager Jun Bei Liu, who manages a $1.5 billion fund, said Woolworths had led the competition for a decade through innovation and investment, a trend that appeared to be reversing.

“Everything was better: management, culture, execution, better margins. In the last few years, [Woolworths] seems to have lost a bit of their way,” she added.

“There’s no confidence in the execution of the turnaround. We can see Woolworths out there publicly talking about lowering price, being competitive and the like, but we’re not seeing sales improvement. If anything they continue to lag significantly.”

Coles’ share price closed 3.9 per cent higher.

In a note to clients, Jarden retail analyst Ben Gilbert said Woolworths’ result was disappointing with “not a lot of good news in there”. He pointed to Australian food sales growth since the new financial year started of just 2.1 per cent, less than half that of rival Coles’ 4.9 per cent.

“[The] question now will be if something more fundamental needs to be done to get shoppers back into stores, as it does not appear, on face value, that Woolworths’ loyalty, price and network investment is yielding the results it should,” Gilbert wrote.

The retailer’s cost of doing business lifted to 23.3 per cent of turnover due to rising wage and superannuation costs. Big W, which has consistently underperformed and weighed on the Woolworths business, recorded a loss of $35 million.

The group is looking to move the discount department chain to a separate technology platform, which has fuelled speculation it may be preparing to spin off the struggling business. Bardwell did not respond directly to questions on whether management was readying for a Big W sale.

“We’re recognising that flexibility for the technology platform for Big W going forward will be important,” she said.

“Big W has a strong transformation plan. The team has put a lot of work in over the last year to substantially improve the range whilst reducing prices, and that has impacted the performance.”

Tobacco sales slumped 30 per cent for Woolworths and its rivals, as customers turn to buying vapes and cigarettes in the illicit market.

Woolworths’ own-brand sales lifted 5 per cent, lagging Coles, which has been growing its range of exclusive products to a level where they now make up more than a third of total revenue.

Bardwell said customers were visiting stores more often but making fewer purchases, and continued to shop across supermarkets to find the best deals.

“Customers are visiting us more frequently, but they’re buying less,” she said. “It’s not accelerating, I would say, but it’s certainly been in place.”

She said the way to rebuilding customer trust was to offer “consistent, reliable shelf prices that [customers] know will be there and available day in, day out, week in, week out”.

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