Stock of the day: Woolworths
Woolworths reports 3.2% Q3 sales growth but faces challenges in the Living division amid Coles competition and easing inflation.
(AI video summary)
This video was created on 1 May for IG audiences by ausbiz.
ASX code: WOW
Woolworths' quarterly results reveal mixed performance
Woolworths released its third-quarter (Q3) trading update, showing a group sales increase of 3.2% to $17.3 billion, exceeding market expectations. Electronic commerce (e-commerce) sales in the food business jumped more than 15% from the previous corresponding period.
However, the Woolworths Living division, which includes Big W and pet stores, underperformed. Weather events such as Cyclone Alfred led to additional costs between $20-25 million due to stock losses.
Average prices (excluding tobacco) declined by 0.5% over the year, marking the fifth consecutive quarter of lower prices for customers.
Woolworths versus Coles in the supermarket sector
While Woolworths's results beat expectations, they fell short of Coles results announced the previous day. This reflects recent trends, with Coles outperforming Woolworths.
Woolworths' pet division, which outperformed during the post-Covid-19 period, has weakened as the company divests some pet stores. Meanwhile, Coles benefits from its liquor division.
Coles is considered by investors to be a 'cleaner business' with stronger short-term performance.
Investment outlook for supermarket stocks
As defensive stocks, both Woolworths and Coles have historically performed well during market volatility. With inflation easing, the negative impacts are diminishing.
Supermarket stocks remain valuable portfolio components, providing long-term dividend yield and stability, with Coles currently having momentum. For investors seeking defensive positions, supermarket stocks offer an attractive option
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