Woolworths Stock Hits 4-Year Low on Cautious Customer Buying

Shares in Woolworths Group Ltd. hit a four-year low on Thursday as the Australian grocer giant flagged cautious customer buying amid a high cost of living and sluggish sales from its Food business.

The company’s stock declined as much as 4.80% to A$30.31 in morning trade, marking its lowest since May 2020.

The shares fell 5.00% by mid-session against a relatively higher overall market, as analysts criticized the Sydney-based retailer for its underperformance in sales volume despite reducing prices on some of their products.

The stock was last trading 4.18% lower at A$30.49 on Thursday.

Woolworths Saw Tough Quarter on Customers’ Careful Buying

Woolworths’ decline was investors’ response to its sales update for the third quarter, which presented a tight scenario for the largest supermarket operator down under and its rival Coles Group Ltd.

The top two grocers are at the forefront of grocery sales in Australia, but they have been heavily pressured by the call for their participation in addressing increased food insecurity without further hurting their profit margins, which have already shrunk.

In joining the fight, the supermarket giant took the step to lower prices of fruit, vegetables, and meat. The move saw average prices ease 0.2%  for the 13-week period ending March 31 this year from a 5.8% surge posted in the same period the year prior.

The firm’s Australian Food business, its primary revenue maker, generated quarterly sales growth of 1.5% to A$12.58 billion ($8.21 billion). Analysts described the jump as slower than the country’s population growth.

On the other hand, Coles reported a 5.1% rise in sales for the same period on Tuesday, while its price increase has eased since the previous year to 1.9%.

Woolworths’ outgoing chief executive, Brad Banducci, acknowledged the company had been out-traded in the third quarter but said it was committed to bringing inflation to a ‘reasonable range.’

Customers were seeking other means of saving, according to Banducci. Concerns within the customer segments across the Australian Food division were at their highest amid a robust surge in the country’s home prices.

The departing chief said increased housing rental costs had introduced a new stage of frugal shopping since the beginning of 2024. While customers’ store visits have become more frequent, they are purchasing fewer items and looking for better deals.

Banducci expects challenging trading conditions to stay in the next 12 months due to customer shopping basket competition and as the price rise retreats to a ‘very low single-digit range.’