Woolworths Group Ltd (ASX: WOW) shares have taken a tumble this week and are down over 8% since last Friday.
The supermarket giant's shares were sold off following the release of its third-quarter update on Thursday.
Is this a buying opportunity for investors? Let's see what analysts at Bell Potter are saying.
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Broker gives its verdict on Woolworths quarterly update
Woolworths delivered sales growth ahead of Bell Potter's expectations. However, it notes that increased costs are hitting its margins. It said:
Woolworths reported +4.5% YoY growth in 3Q26 sales to $18,652m (vs. BPe of $17,745m), driven primarily by Australian supermarket sales growth. Key points: Australian Food: Australian Food revenues grew +6.0% YoY to $13,828m (vs. BPe of $13,549m and VA of $13,721m) noting the pcp was cycling the residual impact of supply chain disruptions. Trading has started 4Q26e strong at +5.4% YoY (+6.5% YoY ex-tobacco) over March-April, despite signs of increased customer caution and signs of pantry stocking in March
2026e guidance changes: (1) Australian Food EBIT is expected to grow at mid-high single digit rates, but no longer at the upper end of that range as WOW absorbs some supply chain cost pressures; and (2) 2H26e NZ EBIT is expected to be modestly down YoY in NZD terms.
In light of this, Bell Potter has trimmed its earnings forecasts for Woolworths through to FY 2028. It adds:
EPS changes are -4% in FY26e, -10% in FY27e and -5% in FY28e. Changes reflect lower GM assumptions, a higher AUDNZD and higher base interest rate assumptions.
Woolworths shares downgraded
According to the note, in response to the update, the broker has downgraded Woolworths shares to a hold rating with a reduced price target of $35.50 (from $38.25).
Based on its current share price of $34.59, this implies only modest upside over the next 12 months.
In addition, dividend yields of 2.6% and 2.7% are expected in FY 2026 and FY 2027, respectively, according to its estimates.
Commenting on its downgrade, Bell Potter said:
We downgrade from Buy to Hold. Food inflation looks to be returning which should be beneficial for the topline. This looks largely offset by the margin impact of absorbing supply chain inflation, which is likely to be amplified in 4Q26e as a run rate into FY27e, where outcomes will be dependent on an easing in Middle East tensions.
