The Woolworths Group Ltd (ASX: WOW) share price is down even though the business reported strong sales growth in the third quarter of FY23.
Woolworths operates the Woolworths supermarket chain in Australia. But it also has a New Zealand supermarket business, a food supply business which supplies other businesses (B2B) and it owns BIG W. It also recently announced the acquisition of a majority of the PETstock business.
FY23 third quarter sales
The company revealed that its Australian food division saw 7.6% sales growth to $12.3 billion. There was a 5.8% increase in the average price for goods in the Australian supermarkets.
The Australian B2B division experienced a 16.4% rise in sales to $1.16 billion.
New Zealand food saw an 8.5% sales rise in New Zealand dollar terms to $2 billion. There was a change in average prices of 9.5% for this division,
Both the Australian and New Zealand supermarkets saw a sizeable decline of the number of items per basket.
BIG W sales saw a 5.7% rise to $1.05 billion. There was a return to shopping in store by customers, as well as the benefit of the timing of Easter. But, sales growth moderated through the quarter after cycling the COVID impacts in the prior year.
Outlook commentary
Sometimes the outlook commentary can have a noticeable impact on the Woolworths share price.
Woolworths CEO Brad Banducci revealed that in the fourth quarter of FY23 to date, sales trends have been “in line with Q3”. It’s seeing “solid sales growth” in its food businesses, but growth is moderating in BIG W.
Mr Banducci said:
We’re seeing signs of overall inflation moderate in food. However, in many areas inflation remains frustratingly elevated and we need to continue to work hard to provide our customers with great value across their shopping basket. This includes a focus on affordable protein, further leveraging our own and exclusive brands, our seasonal prices dropped program and personalised everyday rewards member offers.
Final thoughts on the Woolworths share price
Woolworths shares have dropped slightly after this update. but it’s up 17% in 2023 to date, so I think investors should keep this in mind.
Inflation is helping the Woolworths bottom line profit, so it’s understandable why the valuation has risen. I’m not sure how long food inflation will continue, so I’d rather wait to buy shares at a cheaper Woolworths share price.
