The share price of Woolworths has been hammered after the retailer revealed a 17 per cent drop in full-year profits. The retailer battled through a difficult year, which was punctuated by supply chain issues, industrial action, and losses at discount department store Big W. Investors moved quickly to react, pushing the stock down as confidence dwindled.
Woolworths’ share price slumped after reporting a 17% decline in full-year profits
Share Price Reaction
Woolworths Group Ltd (ASX: WOW) stock dropped in early Wednesday trade after it released its FY 2025 results. The stock closed the previous day at $33.42 but dropped to $29.40 during morning trading. Shares, as of writing, traded at $29.97, down by 10.3 per cent. The wider S&P/ASX 200 index gained 0.2 per cent, showing the company-specific nature of the drop.
The sharp fall echoed investor skepticism about Woolworths’ profit decline. Although sales rose 3.6 per cent to $69.1 billion, profit margins fell and earnings trailed expectations.
Financial Results Pressure
Net profit after tax fell 17.1 per cent to $1.39 billion, while earnings before interest and tax fell 12.6 per cent to $2.75 billion. Margins contracted because Woolworths absorbed supplier price increases instead of passing them on to customers. Gross margin fell to 27.2 per cent, as the cost of doing business increased to 23.3 per cent.
Management declared a final dividend of 45 cents a share, franked. The amount was 21.1 per cent less than last year. Shares will be ex-dividend on 2 September and payment will be made on 26 September.
Difficulty in the Core Food Business
Australian Food sales increased 3.1 per cent to $51.45 billion. Profits fell, however, as consumers switched to home brand products and promotions. The company also battled political and regulatory pressure over accusations that it was profiteering from the cost-of-living crisis.
CEO Amanda Bardwell said Woolworths is focused on rebuilding trust and delivering long-term growth
Chief Executive Amanda Bardwell said disruption in distribution centres, alongside pressures in Victoria and New South Wales, were major contributors to the results. The group invested more than $100 million in lowering shelf prices to rebuild customer confidence.
Big W Losses and Business Review
Big W posted a $35 million loss in FY 2025, continuing to weigh on Woolworths Group results.
Big W remained a drain on group profits, achieving a $35 million loss against last year’s $14 million EBIT. Sales grew 1.1 per cent to $4.64 billion, though, but were compressed by aggressive discounting.
Bardwell had signaled that Woolworths had started assessing Big W. The store will be spun out from the group’s technology platforms in the strategy to drive performance improvement. The management, however, has not indicated if the sale of Big W is on the cards.
Cost-Cutting and Restructuring Efforts
The firm reported a $400 million cost-cutting program to restore the business to profitability. Underperforming businesses such as MyDeal marketplace were shut down, and head office staff cuts were made. New management hires were also instituted at supermarket operations to spearhead the turnaround.
Promotional intensity has increased, as 400 products saw their prices cut by an average of 10 per cent. Woolworths rolled out this program to 700 everyday essentials recently, with average savings of 14 per cent.
Analyst Concerns
The show was handled with care by analysts. Woolworths’ outcome was labeled disappointing by Jarden’s Ben Gilbert, who pointed out that price drops had not created a stronger customer grip. Bank of America’s David Errington questioned whether the group was receiving sufficient returns on its $1.5 billion yearly capital expenditure.
The comparison with rival Coles again fueled the jitters. Woolworths supermarket sales rose 2.1 per cent for the initial weeks of the new fiscal year, or 4 per cent excluding tobacco. Growth in supermarket sales was 4.9 per cent for Coles in the comparable period.
Transition Year Ahead
Bardwell described FY 2025 as “very disruptive” and outlined an orderly transition. The group, she said, aimed to get back to earnings growth in FY 2026, underpinned by a recovery in New Zealand Food and Big W getting back to profit.
The group also expects to witness its Australian supermarkets recover to full strength as price investment and efficiency measures take effect. The early part of the new year’s trading remained below expectations, even though the management reaffirmed its long-term sustainable growth goals.
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Final Thoughts
The share price decline in Woolworths recorded a difficult year marked by lower earnings, rising costs, and pressure on prices. Even though the management has committed to restoring customer trust in terms of reduced prices and cost-reduction measures, investors remain nervous. The group has forecast a turnaround to profit growth in FY 2026, which implies that the next 12 months are the make-or-break time for the country’s biggest supermarket chain.
