...pause the thought of Woolies being a recession proof stock.
...now Woolies has become a higher cost-of-living victim
1. First, from higher product costs arising from supply chain issues
2. Second, from lower disposable income of its customers affecting demand
3. Third, from higher wages demanded by its union to offset higher inflation
4. Fourth, from facing new regulatory/political cost necessitating a curb on prices
5. Fifth, from facing it tough trying to make more money than the previous year when it was able to price gouge
...so the price of it all: they have no choice but to slash costs, possibly also staff and perhaps outlets
...public listed corporations aren't viewed positively if they backtrack on their financial performance. So if WOW had price gouge and made a lot of money under Banducci, they aren't just willing to take a backseat and accept a lower profit than prior years because they face new 'regulatory oversight'. They cut staff. And that adds up to our unemployment numbers, as they are a large employer.
...in other words, you can't win. Perhaps it is time that Australia's duopoly supermarket landscape needs to change somewhat with introduction of competition from larger non-listed companies. One approach may be to merge several independent groups. Woolworths unleashes $400m in cost cuts to convince market it can grow Carrie LaFrenzSenior reporter
Feb 26, 2025 – 10.13am
Woolworths chief executive Amanda Bardwell will slash $400 million in costs and cut the number of products the retailer sells to convince sceptical investors she can reverse a decline in profits.
Bardwell faces a market that is increasingly concerned about the supermarket giant’s trajectory. On a call after the company announced a 20 per cent fall in interim net profit, one analyst questioned Bardwell about whether she could save Woolworths from becoming “uninvestible”.
Along with cost-cutting, Bardwell said in an interview that she wanted to improve its fresh food and own-brand products including Thomas Dux and Macro while reducing the number of brands in other categories.
“Customers are choosing more specials and more specials that have got deeper discounts. Customers are switching from brands to own brand, We’re seeing a shift in terms of customers increasingly looking for value in multiple different ways,” Bardwell said after the result.
Rival Coles reports its result on Thursday, and both supermarkets are grappling with more cost-conscious shoppers as interest rates remain high. There is also significant political pressure ahead of a federal election from both Labor and the Coalition on supermarkets to keep prices lower.
Dragged down by Big W
Shoppers’ perceptions of value at Woolworths also fell in the six months to December 31, the company said, with the Australian Competition and Consumer Commission alleging both major supermarket retailers were offering fake discounts of hundreds of every day grocery items. Both companies say the regulator does not understand how prices are set, and chose a period when there was a surge in the cost of goods.
In October, Woolworths said it had increased its discounting and warned earnings for the first six months of the financial year would come in well short of the $1.64 billion expected by the market. On Wednesday, Bardwell announced first-half earnings before interest and tax of $1.39 billion, short of its forecast of between $1.48 billion and $1.53 billion.
Interim net profit fell 20.6 per cent to $739 million, also dragged lower by the earnings slump at its discount department store chain Big W.
Woolworths also faced a significant industrial dispute in December, which squeezed earnings by about $95 million as shelves remained bare. Excluding the effect of those strikes, sales at its Australian supermarkets would have increased by 3.7 per cent. They rose 2.7 per cent instead.
Sales at those supermarkets rose 3.3 per cent in the first seven weeks of the second half, but Bardwell said she expected earnings to keep falling.
Investment fears
Woolworths shares closed 3 per cent, or 96¢, lower at $30.60.
They have slumped almost 7 per cent over the past 12 months, compared to an increase of 24 per cent at Coles.
Analysts questioned whether the cost-cutting program was enough, given the company had also disclosed rising logistics expenses.
“For a company the quality of Woolworths, we just can’t see the company going backwards on a like-for-like basis,” Bank of America’s David Errington said on the call.
“Other than pulling out costs at head office, what are you going to do to improve the underlying performance?”
“This becomes an uninvestible company because unless you can grow your profits on an underlying basis for your best business, then it’s not investible.”
After the call, the head of research at a major fund manager, who asked for anonymity given they were not authorised to speak publicly, described the call with analysts as “pitiful and uninspiring”.
“Times are tough in grocery … but Woolies has done themselves no favours. Wesfarmers two years ago was thinking about efficiencies, and factoring hefty inflation,” they said. ‘A way to go’
As previously reported by The Australian Financial Review, some investors have been agitating for the company to ditch Big W, where earnings tumbled by 46 per cent, and sell its New Zealand supermarkets.
Bardwell said the company was “assessing the shape of our portfolio overall” but there was “a way to go” and early signs suggested an overhaul of the New Zealand business was working.
The result had other bright spots. Online sales grew 20 per cent, with shoppers using convenience options like same-day delivery, and the Milkrun home-delivery brand that Woolworths acquired out of administration in 2023. Orders fulfilled within two hours made up 31 per cent of e-commerce sales, more than doubling year-on-year.
Across the business, including its newly acquired pet store chain Petstock, sales reached $35.9 billion, up 3.7 per cent but lower than expected.
A lower interim dividend of 39¢ a share was declared, down from 47¢.
