Woolworths Group Ltd (ASX: WOW) shares gained 1.2% on Thursday. That was the day the S&P/ASX 200 Index (ASX: XJO) supermarket giant released its third-quarter sales update.
Shares closed up another 2.32% on Friday, ending the week trading for $32.68 apiece.
That sees Woolworths stock up 7.0% over 12 months, not including the $1.36 a share in fully franked dividends the company paid out over the full year.
If we add those back in, then the accumulated value of Woolworths shares has gained 11.6% over a year.
That's an impressive turnaround for the big Aussie supermarket, considering that shares closed at multi-year lows of $27.75 on 17 March.
Investors who bought the dip six weeks ago will be sitting on gains of almost 18% today.
But with those gains already in the bag, just how much upside do the analysts at Macquarie Group Ltd (ASX: MQG) expect in the year ahead?
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What is Macquarie forecasting for Woolworths shares?
Following Woolies' quarterly update on Thursday, Macquarie retained its outperformance rating on Woolworths shares.
For the three months to 6 April, the supermarket achieved a 3.2% year-on-year increase in sales to $17.3 billion. Woolworths' Australian Food division delivered $13.05 billion in sales, up 3.6% from the prior corresponding quarter.
Macquarie noted:
We expect earnings to bottom in FY25E, with significant growth in FY26E as the group cycles a disrupted year, and cost savings to benefit FY27E+.
The broker said Woolworths shares are still in the "early days" of recovery, which it sees as a long-term story.
According to the analysts at Macquarie:
While there was limited evidence of a turnaround in customer perception and sales, we remain attracted to long-term upside driven by: i) Recovering momentum in the key AU Food segment; ii) further detail on cost savings; and iii) rising importance of retail media.
One negative from this week's quarterly update was the performance of Big W.
Macquarie pointed out that, "Big W 2H25 guidance was reduced to a loss before interest and tax of $70m (prior: -$40m), mainly driven by the impact of clearance sales in Clothing."
However, the broker added:
The [Big W] segment continues to underperform the overall business, and as a result we expect an ongoing review as new management reassesses the portfolio. Given soft performance, we expect any material actions to improve returns and/or re-allocate capital will be taken positively.
Macquarie has a 12-month target price on Woolworths shares of $33.60. That represents a potential upside of 3.0% from Friday's close. And it doesn't include those upcoming dividends.
