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| Woolworths struggles to win back ‘price trust’ from customers – and investors – as Coles value rises | Woolworths struggles to win back ‘price trust’ from customers – and investors – as Coles value rises |
| (30 minutes later) | |
| Market value of Woolworths, Australia’s largest supermarket chain, slips from over $40bn to less than $35bn | Market value of Woolworths, Australia’s largest supermarket chain, slips from over $40bn to less than $35bn |
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| Woolworths has shed more than $5bn in market value as it struggles to regain customer “price trust” and stretches product availability. | Woolworths has shed more than $5bn in market value as it struggles to regain customer “price trust” and stretches product availability. |
| Australia’s biggest supermarket chain on Wednesday reported sales rose 3% in the year to June and 2% in July and August compared to the year before, while profits in 2024-25 fell by a fifth, to nearly $1.4bn. | |
| Its market value slipped from more than $40bn to less than $35bn on Wednesday, while Coles rose to a record value of $31bn. | |
| Coles has attracted a greater share of sales, recording faster growth of 4% in the year to June and 5% in July and August on the year before, lifting annual profits to more than $1bn. | |
| Woolworths cut the shelf prices of 500 items in 2025 in a bid to regain customers’ trust and improve public perception, but chief executive Amanda Bardwell told investors sales momentum was yet to pick up. | |
| “That was always about a long-term investment … to build price trust after a very disruptive 12 or 18 months, so that will take time to flow through,” she said on Wednesday. | “That was always about a long-term investment … to build price trust after a very disruptive 12 or 18 months, so that will take time to flow through,” she said on Wednesday. |
| Short-term boosts such as Woolworths’ Disney Discs promotion in July had also underperformed, Bardwell said, blaming it on customer “fatigue” after running collectible programs “multiple, multiple times”. | |
| The company forecast supermarket earnings would grow slower than market expectations, with price cuts to sap $100m. | The company forecast supermarket earnings would grow slower than market expectations, with price cuts to sap $100m. |
| One analyst said the slowing shopper momentum signalled customers were switching from Woolworths to Coles. | One analyst said the slowing shopper momentum signalled customers were switching from Woolworths to Coles. |
| “That’s $100m of earnings they’re basically sacrificing to lower shelf prices to rebuild customer trust [and] Coles will be looking at this and thinking … ‘how we can respond?’” said Lochlan Halloway, an equity markets strategist at Morningstar. | “That’s $100m of earnings they’re basically sacrificing to lower shelf prices to rebuild customer trust [and] Coles will be looking at this and thinking … ‘how we can respond?’” said Lochlan Halloway, an equity markets strategist at Morningstar. |
| “Coles is taking share from Woolworths … and I don’t think [investors] can see, at the moment, a credible path for Woolies to close the gap,” he said. | “Coles is taking share from Woolworths … and I don’t think [investors] can see, at the moment, a credible path for Woolies to close the gap,” he said. |
| Michael Toner, an RBC Capital Markets analyst, agreed that Woolworths’ ongoing underperformance suggested the company was continuing to lose market share to Coles. | |
| Stock availability issues at Woolworths had impacted perceptions and customer satisfaction, with consistent shortages on Sundays, Bardwell said on Wednesday, citing the impact of industrial action at Woolworths’ warehouses. | Stock availability issues at Woolworths had impacted perceptions and customer satisfaction, with consistent shortages on Sundays, Bardwell said on Wednesday, citing the impact of industrial action at Woolworths’ warehouses. |
| Coles’ product availability, meanwhile, has been boosted by new centres distributing products to supermarkets and online shoppers, Coles’s chief executive, Leah Weckert, told investors this week. | Coles’ product availability, meanwhile, has been boosted by new centres distributing products to supermarkets and online shoppers, Coles’s chief executive, Leah Weckert, told investors this week. |
| “Our availability metrics are probably now at the best we’ve seen them since pre-Covid,” she said. | “Our availability metrics are probably now at the best we’ve seen them since pre-Covid,” she said. |
| Weckert said product delivery had helped Coles take advantage of “green shoots” in consumer spending, as household budgets recover and inflation and interest rates ease. | Weckert said product delivery had helped Coles take advantage of “green shoots” in consumer spending, as household budgets recover and inflation and interest rates ease. |
| “[Customers] are still very cautious … so entertaining at home, eating at home instead of eating out, shopping at multiple retailers: that’s all still quite prevalent,” she said. | “[Customers] are still very cautious … so entertaining at home, eating at home instead of eating out, shopping at multiple retailers: that’s all still quite prevalent,” she said. |
| “You put those three things together and that’s a combination that’s working quite well for us as a supermarket.” | “You put those three things together and that’s a combination that’s working quite well for us as a supermarket.” |
| Coles’s pre-tax margin on earnings rose to 5.3%, with its expanding distribution centres helping cut costs to get products in stores and to online shoppers, and stock loss declining. | Coles’s pre-tax margin on earnings rose to 5.3%, with its expanding distribution centres helping cut costs to get products in stores and to online shoppers, and stock loss declining. |
| Woolworths’ pre-tax margin slipped to 4%, as theft and product waste rose and customers swapped from their typical purchases to cheaper alternatives, according to the company. | |
| Investor sentiment could turn, however, as Woolworths’ price cuts brought back customers, Halloway said, noting neither was likely to lose market dominance. | Investor sentiment could turn, however, as Woolworths’ price cuts brought back customers, Halloway said, noting neither was likely to lose market dominance. |
| “These are century-old businesses, and every now and again, one’s going to outperform the other,” he said. “They’re the dominant players, and I don’t expect that to be eroded.” | “These are century-old businesses, and every now and again, one’s going to outperform the other,” he said. “They’re the dominant players, and I don’t expect that to be eroded.” |
| Both supermarkets have faced pressure in the last year over findings they hiked prices during a cost-of-living crisis to boost profits and are defending legal proceedings over allegations they misled shoppers by offering “illusory” discounts on hundreds of common products. | Both supermarkets have faced pressure in the last year over findings they hiked prices during a cost-of-living crisis to boost profits and are defending legal proceedings over allegations they misled shoppers by offering “illusory” discounts on hundreds of common products. |