Woolworths has missed analyst expectations with its interim earnings

Warehouse strikes, higher wages, tardy stock and falling customer satisfaction have been called out as Woolworths chairman Scott Perkins made a rare admission that results are not up to scratch.

Woolworths CEO Amanda Bardwell. Picture: Renee Nowytarger

Woolworths has conceded its first-half performance was below its expectations as industrial action at its warehouses, a worsening performance by its flagship Australian supermarkets arm, and the impact of higher wages and business costs sank its profitability.

The nation’s largest retailer, whose operations span supermarkets to general merchandise to pet products and food services, did report a swing back to profit for the first half, posting a net profit of $741m, against a loss of $781m for the previous corresponding period, but lower earnings at its Australian supermarkets tarnished the result.

Its latest profit result missed analyst expectations, with the market pencilling in profit of $783.8m, and investors will pay the price for the poorer performance with Woolworths slashing its interim dividend by 17 per cent to 39c a share, payable on April 23.

Pre-tax earnings dropped 14 per cent to $1.451m.

The retailer has revealed that customer satisfaction at its supermarkets – the driver of 95 per cent of group earnings – worsened after the competition regulator launched legal proceedings against it and Coles in September over allegations of fake discounts and was then compounded by almost three weeks of industrial action that left shelves empty and shoppers unhappy.

The impact of the industrial action amounted to $95m.

Sales at Australian supermarkets were up only 2.7 per cent to $26.66bn, with earnings for the crucial division falling nearly 13 per cent to $1.39bn.

Woolworths chairman Scott Perkins and CEO Amanda Bardwell. Picture: Dallas Kilponen

Lower average selling prices at its struggling general merchandise store Big W, as well as the late arrival of spring and summer clothing, also dented the retailer’s group earnings.

The almost doubling of losses to $106m caused by the absence of share in profits from its spun off Endeavour Group business, lower property sales and higher costs also crunched group earnings.

“The performance in the half was below our expectations with a combination of rapidly changing customer behaviours and significant disruption,” Woolworths chairman Scott Perkins said on Wednesday after Woolworths issued its December half results.

“We are focused on addressing these challenges and under our new CEO, Amanda Bardwell, we have a clear set of priorities for 2025.”

The frank and unusual admission from the Woolworths chairman came as Woolworths admitted to a raft of problems now plaguing its supermarkets, the engine of growth, although there were better performances from its pets arm and early signs of recovery at Big W.

Woolworths CEO Amanda Bardwell. Picture: Supplied

The first-half result was hit by a number of external factors, led by industrial action at its warehouses just before Christmas – with sales in Victoria still not recovering – and the legal action from the Australian Competition & Consumer Commission, plus political heat on supermarkets impacting consumer sentiment.

The company said group sales increased by 3.7 per cent to $35.93bn, with sales at its B2B business up 5.5 per cent to $2.98bn, New Zealand supermarket sales up 0.9 per cent to around $3.89bn and sales at W Living, which houses its pets and health arms, up 16 per cent to $3.08bn.

“In Australian Food (supermarkets), the team has worked incredibly hard to recover from the supply chain disruptions caused by industrial action in November and December,” Ms Bardwell said.

“In Victoria, sales have not yet fully recovered but availability and customer metrics are returning to pre-disruption levels with ongoing efforts to regain customers.”

The retailer said in Australia its supermarket sales growth of 3.3 per cent in the first seven weeks of the second half was driven by a more stable trading environment following the recovery from industrial action, cycling lower growth in the prior year, a collectibles program and ongoing e-commerce growth.

Originally published as Woolworths has missed analyst expectations with its interim earnings