The Woolworths Group Ltd (ASX: WOW) share price dropped by 9% after the supermarket business revealed its FY26 third quarter update.
Woolworths is the largest supermarket business in Australia. It also owns the Countdown supermarket business in New Zealand, BIG W and Petstock.
FY26 third-quarter performance
The business reported that in the 13 weeks to 5 April 2026, total third-quarter sales rose 4.5% to $18.1 billion. Group e-commerce sales grew by 20.2% to $2.7 billion.
Within that:
- Australian food sales rose 5.9% to $13.8 billion
- Australian business-to-business (B2B) sales grew 4.9% to $1.5 billion
- New Zealand food sales fell 5.2% in AUD terms to A$1.81 billion, but rose 1.4% to NZ$2.15 billion in New Zealand dollar terms
- W Living (BIG W and Petstock) sales rose 4.8% to $1.27 billion
Within the Australian food segment, Woolworths reported comparable transaction growth of 1.9%, comparable items per basket growth of 2.4% and comparable item growth was 4.3%. E-commerce as a percentage of sales was 16.6%, up from 14.2% in the third quarter of FY25. Excluding tobacco, Australian food sales were up 7.3%.
For that 13-week period, the change in average prices was negative 0.8%, or negative 0.7% excluding tobacco and fruit and veg.
However, adjusting for Easter, Woolworths said its Australian food sales growth was only 3.6% and total inflation excluding tobacco and fruit and veg was negative 1.2%.
Within W Living, BIG W sales rose 3.9% to $1.03 billion and Petstock sales surged 15.9% to $237 million. Petstock benefited from new store openings in prior periods, franchise site repurchases and the acquisition of own brand pet food manufacturing and accessories businesses.
Profitability expectations
Woolworths noted that the conflict in the Middle East is creating greater uncertainty for customers, suppliers and the team.
It has already suffered from higher fuel costs, while secondary effects are likely to have an increasingly inflationary impact as the months go by.
Woolworths said that by “putting customers first and maintaining a strong focus on productivity and cost discipline”, it thinks it can navigate the current environment.
It said it’s trying to minimise the impact on customers while recognising the cost pressures being felt by suppliers and transport partners.
In March and April, Australian food retail sales were up 5.4% (or up 6.5% excluding tobacco) year on year. It provided this time period because it includes both Easter and ANZAC day in both this year and last year.
It also noted that March benefited from pantry stocking and cycling industrial action impacts last year.
Australian food EBIT (EBIT explained) growth is still expected to be in the mid to high single digit range, but it’s no longer expecting to deliver at the upper end of the guidance range. This reflects higher fuel costs and investments in price to manage rising inflation.
In New Zealand, market growth continues to slow and the market remains competitive. NZD second half EBIT is expected to decline modestly, though total FY26 EBIT is expected to rise.
BIG W sales growth remains “modest”, though the quality of sales remains strong and it expects to deliver positive EBIT and cashflow for FY26.
Outlook for the Woolworths share price
The shorter-term hit to profit is not ideal for shareholders, explaining the current 6% decline, but it could (re)build goodwill for the longer-term.
I’m not sure if this is a good time to invest in Woolworths shares considering the unknowns of how much inflation there’s going to be and how customers will respond.
If it’s a struggle to grow profit for the foreseeable future, there are other defensive ASX dividend shares I’d rather buy.
