In an unusual turn of events, Woolworths, Australia’s largest supermarket chain, has experienced a significant drop in profit, down nearly 21% to $739 million for the six-month period. This decline is attributed to customers adapting to rising living costs by adjusting their grocery spending away from Woolworths and towards other retailers. Furthermore, industrial disruptions at Woolworths’ warehouses and a strong consumer focus on finding discounts have exacerbated the decline. The company is also grappling with damage to its reputation, stemming from legal proceedings alleging misleading discount practices on numerous products.
Woolworths’ CEO, Amanda Bardwell, noted a marked shift in shopping habits, with customers remain loyal but purchasing fewer items as they seek deals from various retailers. Bardwell acknowledged the increasing cost-of-living pressures as a significant factor, with a noticeable escalation in value-seeking behavior since mid-2024. In response, Woolworths has initiated a $400 million cost-saving program, which is expected to result in redundancies.
Despite these challenges, Woolworths’ Australian supermarket division saw a 2.7% increase in the value of grocery sales to $26.7 billion. However, profit margins were compressed due to shoppers seeking deals and higher meat input costs. Woolworths’ share price fell by nearly 3%, and it announced an interim dividend of 39 cents per share, down from 47 cents a year ago.
This is a rare downturn for Woolworths, which has historically performed well during the pandemic and inflationary periods, attracting scrutiny from the public and politicians. The Australian Competition and Consumer Commission (ACCC) is expected to release its final report on the supermarket sector soon, following concerns that the highly concentrated market may stifle competition.
Bardwell acknowledged increased media attention on the supermarket sector and reported that while food and pantry sales remain strong, some customers are seeking personal care products, household items, and pet supplies elsewhere. The impact of industrial action at its warehouses was estimated to be around $240 million in lost sales.
The financial results reflect broader changes in consumer behavior, with many making significant Changes to their spending habits amid ongoing cost pressures. The Reserve Bank governor, Michele Bullock, expects that consumers will feel better about living costs as wages rise in the coming year.
Source: https://www.theguardian.com/business/2025/feb/26/woolworths-profit-slumps-as-cost-of-living-drives-shoppers-elsewhere
