Woolworths Stock Rise After Special Dividend

By Himanshi Akhand

(Reuters) – Shares of Woolworths surged on Wednesday following the announcement of a special dividend, despite the grocery chain reporting a full-year profit drop that matched analysts’ forecasts. The decline was attributed to reduced shelf prices aimed at competing with rival, Coles.

Woolworths’ stock increased by as much as 2.3%, reaching its highest level in nearly six months as of 0035 GMT.

The supermarket giant is facing challenges due to poor performance in key divisions, exacerbated by inflation-related margin pressures and rising operational costs. Competing intensely in the market has made it difficult for Woolworths to keep pace with changing consumer trends.

To combat heightened competition and cross-shopping practices, the company reduced prices and transferred some cost savings onto customers.

As a result, inflation impacts in the food businesses and BIG W segment decreased significantly in the latter half of the year, leading to a slowdown in item growth and overall sales momentum.

The chain’s total group sales for the year ending June grew by 3.7% on a normalized basis, amounting to A$67.92 billion ($46.13 billion).

“Looking ahead, improving customer scores, item growth, and lower inflation offer reasons for optimism,” said outgoing CEO Brad Banducci in a statement. “However, our customers continue to face significant financial stress related to mortgages and rent, leading us to expect continued caution amidst a challenging trading environment for the remainder of the financial year.”

Sales from Woolworths’ largest division, Australian Food, increased by about 3% in the first eight weeks of fiscal 2025.

Analysts from Citi noted improved sales momentum in Australian Food, stating that the gap with Coles has mostly narrowed. This development is expected to alleviate concerns of a severe decline under the incoming CEO.

For the year, Woolworths reported an annual underlying net profit after tax of A$1.71 billion, closely aligning with a consensus estimate of A$1.72 billion from Visible Alpha.

In addition to the regular final dividend of 57 Australian cents per share, the company also declared a special dividend of 40 Australian cents.

($1 = 1.4723 Australian dollars)