The Woolworths Group Ltd (ASX: WOW) share price is being sold off on Wednesday.
In morning trade, the supermarket giant's shares are down almost 6% to $30.96.
This follows the release of the company's first quarter sales update.
Woolworths share price sink on sales update
For the three months ended 6 October, Woolworths reported a 4.5% increase in group sales over the prior corresponding period to $18 billion. This includes ecommerce sales of $2.4 billion, which represents an increase of 21.2%.
The key Australian Food business had a strong quarter for sales. It recorded a 3.8% lift in sales to $13,595 million. While this is positive, management's commentary on its Australian Food earnings may have caused a few concerns. Woolworths' new CEO, Amanda Bardwell, said:
Australian Food total sales increased by 3.8% due to a strong focus on value in the quarter, improved availability, Disney collectibles and strong eCommerce sales growth of 23.6%. Customers remain highly value-conscious and continue to purchase more items on special or trade down to lower priced items including Own Brand. These competitive factors together with strong eCommerce growth is leading to a lower margin sales mix which has impacted earnings. In October to date, total sales have increased by approximately 3%.
The star of the show for the quarter was the newly formed W Living segment. It comprises BIG W, Petstock, Healthylife, and Woolworths MarketPlus (WMP). WMP includes BIG W Market, MyDeal and Everyday Market.
During the three months, W Living delivered a 17% increase in sales to $1,357 million. Bardwell commented:
W Living sales increased by 17% reflecting the acquisition of Petstock in January 2024. BIG W sales were down 0.9% in the quarter with solid item growth offset by lower average selling prices as we increased our range of opening price points, lowered prices and customers traded down to more affordable options. Despite material improvements to our new Spring/ Summer range, sales were impacted by timing of stock receipts during the quarter.
October sales to date were broadly in line with the prior year; however, trading over the rest of Q2 remains key. Petstock sales increased by approximately 5% in Q1 compared to the same period in the prior year before Woolworths Group ownership.
Outlook
Also putting pressure on the Woolworths share price today has been management's outlook statement.
In light of its first quarter performance, it believes the key Australian Food business will fall short of expectations during the first half. Bardwell adds:
While the key Q2 trading period remains ahead of us, Australian Food EBIT for the first half is forecast to be below our previous expectations. We currently expect H1 F25 EBIT, including $40 million of incremental supply chain costs, to be within a range of $1,480 million to $1,530 million compared to $1,595 million in H1 F24.
We understand the need to prioritise the areas that can deliver the most impact and simplify the way we work to deliver strong long-term sustainable value for our shareholders. We will provide a more detailed update on the outlook for the remainder of the year at our H1 F25 results in February.
