Woolworths: On track but still more to do

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Alex Lu
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By Alex Lu
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Date posted:
26 October 2023, 7:00 AM
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  • Woolworths (ASX:WOW) reported a mixed 1Q24 sales trading update. While Australian Food sales growth surprised slightly to the upside, NZ Food and BIG W sales were lower than anticipated.
  • In our view, the key highlight was a pickup in volume growth in Australian Food aided by a moderation in inflation (particularly in Fruit & Veg and Meat).
  • The key negative was management’s guidance for 1H24 NZ Food EBIT to be below 2H23 (NZ$127m) and the prior year (NZ$122m). We had previously forecast 1H24 NZ Food EBIT of NZ$169m.
  • We adjust FY24/25/26F group EBIT by -3%/-3%/-3% mainly on the back of material downgrades to NZ Food earnings forecasts.
  • Our target price reduces to (login to view) and we maintain our Add rating. While NZ Food faces a challenging trading environment and BIG W is exposed to softer discretionary spending, the core Australian Food business (87% of FY23 group EBIT) continues to perform well supported by population growth and a shift to in-home consumption.

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