Why did the Woolworths share price sink 15% in FY 2024?

The Woolworths share price got hammered in FY 2024. But why?

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The Woolworths Group Ltd (ASX: WOW) share price just finished a rather dismal financial year.

Shares in the S&P/ASX 200 Index (ASX: XJO) supermarket giant closed out FY 2023 trading for $39.73. On 28 June, the final trading day of FY 2024, shares ended the day changing hands for $33.79 apiece.

That saw the Woolworths share price down a painful 14.9% over the 12 months.

For some context, the ASX 200 gained 7.8% over this same period.

Now the 14.9% loss doesn't include the $1.05 a share in fully franked dividends Woolies paid out over the 2024 financial year. Woolworth stock currently trades on a fully franked trailing dividend yield of 3.09%.

Here's what put the ASX 200 supermarket under selling pressure.

Why did the Woolworths share price tank in FY 2024?

The Woolworths share price was in a downtrend for much of FY 2024, with inflation impacting customer shopping habits while also driving up the costs of doing business.

ASX 200 investors have also been mulling over the possibility that the government could force Coles and Woolworths to split off some of their businesses in a bid to increase the competitive landscape among Australia's oligopolistic supermarket operators.

But as you may have noted in the price chart up top, a big part of the pain for the Woolworths share price came on 21 February.

That's when Woolies reported its half-year results and announced the unexpected departure of long-serving CEO Brad Banducci. Banducci will be replaced by top Woolies executive Amanda Bardwell on 1 September.

Among the positives in those financial results, revenue for the six months was up by 4.4% year on year to $34.64 billion.

However, losses after significant items were $781 million, down from a profit of $845 million in the prior corresponding half-year. Much of that was due to a $1.5 billion non-cash write-down of the supermarket's New Zealand business.

And management reported that with inflationary pressures making customers more cautious, sales over the first seven weeks of Q3 had continued to moderate.

Investors responded by sending the Woolworths share price down 6.6% on the day.

Fast forwarding to that third-quarter update, released on 2 May, and Woolies reported achieving a 2.8% increase in total sales to $16.8 billion.

But with consumers tightening their belts, the company's Big W business saw sales fall 4.1% over the three months.

Outgoing CEO Brad Banducci admitted that conditions were challenging.

"It was a challenging quarter across the group with a noticeable shift in customer sentiment and shopping behaviours since Christmas," he said on the day.

Looking ahead, Banducci added:

We expect trading conditions to be challenging for the next 12 months due to competition for customer shopping baskets and as inflation returns to a very low single digit range.

As for FY 2025, the Woolworths share price is up 0.44% in the nascent new financial year, currently at $33.94.

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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