Strike, discounting hit H1 profit for Australia's Woolworths

By Byron Kaye and Himanshi Akhand

(Reuters) - Top Australian supermarket chain Woolworths said first-half profit fell the most in a decade as rising living costs spurred bargain-hunting and a warehouse strike left shelves bare, and warned the austerity would weigh on future results.

Underlying profit before one-off items tumbled by one-fifth in the six months to January 5 for the company which sells more than one-third of Australian groceries, as a 17-day strike at distribution centres wiped A$240 million ($152.1 million) from sales and shoppers favoured cheaper products.

The result shows the Sydney-listed company's exposure to multiple economic pressures: consumers saddled with high housing, energy and fuel costs are increasingly relying on discounts and shopping around for better deals, while workers seize on a low unemployment rate to push back on what they see as onerous demands.

Woolworths is Australia's biggest employer with nearly 200,000 staff.

Sales of long-life store-brand food jumped 7.1% in the period, nearly three times the rate of overall Woolworths Australian food sales, while the strike of more than 1,500 warehouse workers from November to December slowed food sales by nearly two-thirds from the first to the second quarter.

Net profit excluding one-off items fell 20.6% to A$739 million for the six months, missing the Visible Alpha consensus estimate of A$770 million, and the company forecast pre-tax profit would fall in the mid-single digits in the second half.

"It is not the result any of us would have liked," CEO Amanda Bardwell told journalists on a call.

Woolworths saw from mid-2024 an "acceleration in value-seeking behaviour, and that shift has continued", Bardwell added.

Woolworths shares were 2.7% lower in morning trading on Wednesday, against a slightly lower market, as analysts looked past the company's plan to cut A$400 million a year in back-office costs and downgraded full-year forecasts in line with the company's guidance.

"The ... cost-out program will be a positive surprise, though the market may be disappointed with the 2H25 Australian food outlook," Citi analysts wrote in a note.

E&P analyst Phillip Kimber said in a note that the company's "guidance comments are generally weaker" and suggested Woolworths full-year profit would be 5% lower than previously expected.

Woolworths cut its interim dividend to 39 Australian cents per share from 47 Australian cents last year.

No. 2 competitor Coles is expected to announce its first-half results on Thursday.

($1 = 1.5768 Australian dollars)

($1 = 1.5783 Australian dollars)

(Reporting by Himanshi Akhand and Sneha Kumar in Bengaluru; Editing by Krishna Chandra Eluri and Stephen Coates)

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