Woolworths shares sink after lowering EBIT growth guidance for Australian Food
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More news: Woolworths shares slid in morning trade after downgrading its guidance for earnings before interest and tax for the Australian Food segment amid rising fuel costs and investments to support customers, including a new “price freeze” promotion.
The supermarket giant said that EBIT growth for the segment is “still expected to be in the mid to high single digit range but no longer at the upper end of the range”.
At 11:50am AEST, shares in Woolworths had fallen 6.1% to $35 but was still up 18.9% in the year to date. Woolworths led the broader consumer staples sector (-4.4%) lower and as rival Coles saw its shares decline 3.2% to $22.22.
RBC Capital Markets analyst Michael Toner said that while sales trends are “strong”, he acknowledges the “impact of the Middle East conflict since February”.
He flagged that “the downgrade in guidance shortly after upgrading in Feb is still somewhat surprising to us in the context of very strong top line trends which have continued through the 2H, and on this basis we view the result as soft on balance in the context of strong share price performance up almost +27% [year to date].”
Woolworths group sales hit $18.1b in third quarter, warns of impacts from Middle East conflict
The news: Woolworths has reported a 4.5% year-on-year increase in third quarter group sales to $18.1 billion due to the impacts of some customers “stocking up” in the latter part of the period and the effect of industrial action in the previous corresponding period.
The numbers: Australian food sales lifted 5.9% to $13.8 billion, Australian business-to-business sales lifted 4.9% to $1.5 billion and New Zealand Food fell 5.2% to $1.8 billion.
Meanwhile, group e-commerce sales lifted 20.2% year on year to $2.7 billion.
The context: Woolworths revenue remained strong during the third quarter but CEO Amanda Bardwell warned that the company is “seeing early signs that the conflict in the Middle East is impacting our customers and team, many of whom were already experiencing significant cost-of-living pressures”.
Bardwell said the group has taken “necessary steps” to mitigate the impacts of the fuel shock on customers while “recognising the genuine cost pressures being felt by our suppliers and transport partners”.
What they said: “Looking ahead, the conflict in the Middle East is creating greater uncertainty for our customers, suppliers and team at a time when cost-of-living pressures are already acute,” Bardwell said.
“While the impact on the group to date has been limited, higher fuel costs and secondary effects are likely to have an increasing inflationary impact as we move through the calendar year.”
The sources: ASX, RBC Capital Markets research
