The Woolworths Group Ltd (ASX: WOW) share price is in the green today.
Shares in the S&P/ASX 200 Index (ASX: XJO) supermarket giant closed yesterday trading for $28.18. In late morning trade on Thursday, shares are swapping hands for $28.39 apiece, up 0.8%.
For some context, the ASX 200 is up 0.2% at this same time.
Despite today's welcome boost, the Woolworths share price has been trailing the benchmark, and the performance of chief rival Coles Group Ltd (ASX: COL), over the past 12 months.
As you can see in the chart below, Woolworths stock remains down just over 12% since this time last year. Meanwhile, the Coles share price (not shown) is up more than 14% over the full year, while the ASX 200 has gained a more tepid 1%.
With this underperformance in mind, management used the recent release of Woolworths' half-year results to highlight some core actions the company is taking to unlock its full potential.
Looking to the year ahead, Woolworths CEO Amanda Bardwell said:
Our priorities for 2025 are clear and we are already underway. We have an opportunity to further improve the shopping experience for our customers, we are taking steps to simplify our business and are committed to unlocking the full potential of the group.
And the company cited five key steps it is taking, which could support the Woolworths share price longer term. Those steps are:
- Continue to improve retail fundamentals across value, range and availability
- Simplify to increase impact for customers and deliver efficiencies. Support Office costs savings of around $400 million
- Embed leadership and organisational changes
- Successful opening and ramp up of New South Wales supply chain assets
- Assess shape of group portfolio
Now, it's the second bullet point above, the $400 million in cost savings, that's grabbing brokers' attention.
Woolworths share price could benefit from reinvested savings
Morgan Stanley analyst Melinda Baxter forecasts that Woolies will plough back around half of the $400 million in cost savings into the business.
According to Baxter (quoted by The Australian Financial Review):
Woolworths is undecided as to the share of the cost out that will be reinvested in the business (notably in price) versus going to the bottom line. We factor into our estimates Woolworths reinvesting about 50% of the savings back into the business.
With Baxter noting this could boost earnings by around $150 million in the next financial year, the Woolworths share price could catch some tailwinds.
Woolworths' earnings before interest and tax for the half year came in at $1.45 billion, down 14% year on year.
Jarden's Ben Gilbert added that shareholders in the ASX 200 supermarket should benefit from Woolies banking "at least" $30 million in 2026.
"We estimate every 25% banked is worth greater than $1.20 per share to Woolworths," Gilbert said.
