
Woolworths financial year 2025 results
Woolworths Group (ASX:WOW), one half of Australia’s supermarket duopoly, just released its full-year results for the 2025 financial year. The numbers painted a picture of significant headwinds and a planned recovery. The results were largely in line with consensus expectations, but the company spelled out a softer-than-anticipated outlook, triggering a sharp sell-off in the stock.
At the time of writing, Woolworths shares have likely made a significant dent in super funds, having fallen to around $29 from more than $33 yesterday. Investors are particularly concerned about declining profits, margin pressures, and challenges in key segments, despite the company highlighting pockets of strength in digital operations and internationally.
At the group level, sales edged up by a modest 1.7 per cent to $69.1 billion. Growth rises to 3.6 per cent when normalised to account for the 52-week period compared to the prior year’s 53 weeks. Underlying earnings before interest and tax took a notable hit, dropping 14.6 per cent to $2.75 billion, or 12.6 per cent on a normalised basis. The result reflected broader cost pressures and operational disruptions.
Underlying net profit followed suit, declining 19.1 per cent to $1.38 billion, with earnings per share mirroring this drop – down 19.1 per cent to $1.135 per share. On a statutory basis, net profit actually rose $855 million to $963 million.
WOW’s EBIT margin contracted by 70 basis points to four per cent, while net debt to EBITDA climbed to 2.8 times, signalling a slight strain on the balance sheet. Dividends were also trimmed, with the final payout at 45 cents per share – down 21.1 per cent –bringing the full-year ordinary dividend to 84 cents, a 21 per cent reduction that underscored the company’s cautious approach to capital returns amid the earnings retreat.
Segmental
The core Australian Food division, which remains the engine of the business and a key driver of the Woolworths share price, saw sales increase by 1.2 per cent to $51.4 billion, or 3.1 per cent on a normalised basis. However, earnings before interest and tax in this unit slumped 12.6 per cent to $2.75 billion, adjusting to a 10.5 per cent decline on a like-for-like basis.
The downturn was attributed to a confluence of factors, including persistent cost inflation, investments in competitive pricing to win back customer trust, elevated stock losses (petty theft in Victoria?), a shift toward lower-margin own-brand products, and wage hikes.
Industrial action in the first half alone cost $95 million, while supply chain expenses and a reduced mix of higher-margin in-store sales added further pressure.
Encouragingly, e-commerce sales within this segment surged 17.4 per cent on a normalised basis, pushing online penetration to a record 15.1 per cent, and customer satisfaction scores improved in the fourth quarter thanks to better retail execution and fewer disruptions.
The Australian B2B arm, encompassing operations like PFD Food Services (Australia’s largest wholesale food distributor), provided a steadier performance, with sales rising 2.7 per cent to $5.7 billion and earnings before interest and tax, climbing 12.4 per cent to $137 million. The growth was fuelled by margin enhancements at PFD and robust double-digit expansion in the third-party supply chain business, offering a counterbalance to weaknesses elsewhere.
Over in New Zealand Food, sales grew 1.5 per cent to NZ$8.3 billion in local currency terms, supported by the ongoing rebranding to Woolworths and transformation initiatives that resonated with shoppers and drove unit volume growth. Earnings here rebounded strongly, up 38.3 per cent to NZ$150 million, marking a sharp recovery from the previous year’s steep decline, with e-commerce sales also advancing 17.1 per cent.
The W Living division, which includes discount retailer Big W, Petstock, and MarketPlus and HealthyLife, emerged as a major pain point. Sales climbed 8 per cent to $5.6 billion, aided by affordable offerings and seasonal clearances that lowered average selling prices, but the segment swung to a $63 million loss, worsening from the prior year’s $29 million deficit.
Big W alone recorded a $35 million loss, exacerbated by operational challenges, while Petstock contributed $44 million in earnings during its first full year under Woolworths’ ownership, though this was tempered by mandated divestitures of stores and vet clinics to satisfy regulatory requirements.
The digital and media arm, WooliesX, was a bright spot, with earnings before interest and tax soaring 23.8 per cent to $428 million on sales growth of 16 per cent to $9.62 billion. This momentum was driven by the expansion of Everyday Rewards to 10.4 million active members, heightened app engagement, and growth in complementary services like insurance and mobile, which now serve over 1.1 million customers.
Outlook
Woolworths’ management, led by CEO Amanda Bardwell, framed 2026 as “transitional” with the aim to rebuild momentum. In the first eight weeks of FY26, Australian Food sales rose 2.1 per cent, or four per cent excluding tobacco, though this lagged competitors.
New Zealand Food sales increased 2.6 per cent, affected by temporary rival promotions, while Big W sales remained broadly flat.
The company anticipates a return to mid- to high-single-digit reported earnings growth in Australian Food, albeit short of consensus forecasts around 11.8 per cent, with headwinds from an accelerated tobacco sales decline impacting earnings by $80 million to $100 million and $60 million in costs for replacing core retail systems.
Big W is expected to return to profitability, and New Zealand Food is expected to see continued improvement.
Over the medium term, Woolworths aims for sustainable mid- to high-single-digit earnings growth, underpinned by a $400 million cost-cutting program targeting above-store efficiencies by December 2025, investments in automation and supply chain transformation, and a renewed emphasis on lower shelf prices to restore affordability perceptions and reclaim market share.
Of course, ‘mid-to-high single-digit growth means it could take several years to return to 2024 profit levels.
Bardwell openly acknowledged the dissatisfaction with FY25’s performance, particularly the losses at Big W, but expressed confidence in the turnaround strategy, which includes refreshing the leadership team, simplifying operations, and prioritising retail fundamentals like value, product range, and availability to rebuild customer trust.
While the results met expectations, the subdued guidance and early trading softness didn’t inspire confidence and contributed to the share price reaction. Woolworths shares are now trading at a discount to historical multiples, and if the CEO can position Woolworths for stronger growth, especially as food inflation moderates and e-commerce scales further, current levels could mark a low point. In a competitive landscape that includes Aldi and Coles, execution will be everything. WOW has traded between 15 and 28 times prospective earnings. We value the stock at $32.33 per share given the easing of cost inflation and the growth of eCommerce.
Disclaimer:
The Montgomery Fund and the Australian Eagle Fund own shares in Woolworths. This article was prepared 27 August with the information we have today, and our view may change. It does not constitute formal advice or professional investment advice. If you wish to trade Woolworths you should seek financial advice.