The largest ASX 200 consumer share hit a near six-year low last week. Being one of the high quality dividend paying stocks, investors have started showing some interest as indicated by volume profile.
Woolworths Group Limited (ASX: WOW)
Woolworths Group has reported its half-year financial results for the period ending January 5, 2025, showing a 3.7% increase in group sales to $35.9 billion. However, group EBIT declined by 14.2%, primarily due to a 12.8% drop in Australian Food EBIT, impacted by industrial action, supply chain costs, and promotional investments. Excluding one-off disruptions, Australian Food EBIT would have declined by around 5%, reflecting increased costs and shifting customer preferences towards value-oriented products.
Despite challenges, New Zealand Food delivered strong EBIT growth of 15.2%, supported by ongoing business transformation. Australian B2B EBIT also grew by 9.9%, benefiting from sales growth and improved efficiency in supply chain operations. BIG W, however, faced difficulties, with its EBIT declining by 45.9% due to lower average selling prices and stock flow issues, despite solid item growth.
The company faced headwinds from ongoing cost-of-living pressures affecting consumer behavior, leading to increased price sensitivity and a shift toward more heavily discounted and lower-priced products. To counteract this, Woolworths invested significantly in pricing and promotions, while also improving product availability and customer experience. The eCommerce segment showed resilience, with strong growth of 20%, particularly in same-day delivery services and the MILKRUN platform.
In response to operational challenges, Woolworths has laid out clear priorities for 2025, focusing on retail fundamentals such as pricing, product range, and supply chain improvements. It also aims to simplify operations and achieve cost savings of approximately $400 million through efficiency measures. Leadership changes and organizational restructuring are underway to enhance decision-making and operational agility.
Woolworths expects a more stable trading environment in the second half of the year, with Australian Food sales showing a 3.3% increase in early 2025. However, cost pressures, particularly in red meat pricing and supply chain costs, are expected to persist. The company remains committed to customer value, operational efficiency, and strengthening its market position while navigating economic uncertainties and evolving consumer preferences.
(Source: Company's Report)
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