Woolworths Group Earnings Call Reveals Strong Core Momentum

Woolworths Group Ltd ((AU:WOW)) has held its Q2 earnings call. Read on for the main highlights of the call.

Woolworths Group Ltd’s latest earnings call painted a largely upbeat picture beneath some heavy one-off charges. Management highlighted robust sales growth, strong underlying EBIT and EPS gains, accelerating eCommerce profitability and solid cost savings, arguing that core trading momentum and strategic progress more than offset the drag from remediation provisions and supply chain transition costs.

Broad-based sales growth across the group

Group revenue grew steadily, with sales up 3.4% to $37.1 billion in the first half of FY26 and every trading segment contributing. Management framed the result as proof that consumer demand remains resilient across food, general merchandise and services despite a still cautious spending environment.

Underlying profit and EPS surge before one-offs

Profitability before significant items strengthened meaningfully, with group EBIT up 14.4% to $1.7 billion and NPAT before significant items rising 16.4% to $859 million. Basic EPS before significant items climbed 16.4% to $0.704, underscoring that the underlying earnings engine is accelerating even though reported profit was hit by remediation charges.

eCommerce growth turns increasingly profitable

Digital channels remained a standout, with group eCommerce sales up 14.6% and WooliesX sales up 14.2% as more customers shifted to online and on-demand. Profitability also improved, with eComX directly attributable profit jumping 93% thanks to better picking productivity and more efficient last‑mile delivery.

Cost savings bolster margins and fund value

The group delivered its $400 million run‑rate cost savings target by December, helping to lower costs and support investment in price. Cost of doing business as a share of sales fell 24 basis points in the half, giving Woolworths more room to sharpen value for customers while protecting underlying profit margins.

Complementary businesses power earnings expansion

Complementary businesses were a key earnings driver, contributing about one‑third of group EBIT growth in the half as the ecosystem strategy gained traction. Petstock led the way with sales up 13.1% and EBIT surging 49.6%, while PFD and the Rewards & Services arm also posted double‑digit underlying EBIT increases.

BIG W and New Zealand deliver turnaround gains

General merchandise and New Zealand operations both improved, with BIG W gross transaction value, including Marketplace, up 5.8% and EBITDA rising 12%. BIG W EBIT soared 122% on better mix and stock management, while New Zealand Food lifted EBIT 22.4% and grew eCommerce sales 13.9% in local currency.

Solid cash generation and disciplined capex

Operating cash flow before interest and tax reached $3.2 billion, up 4.5%, supporting ongoing investment and balance sheet resilience. Management spent $913 million in operating capex in the half and still expects around $2.0 billion for FY26 as it funds supply chain upgrades, stores and digital infrastructure while keeping net debt to EBITDA at about 2.7 times.

Higher dividend signals confidence in cash flows

Shareholders are seeing the benefit of stronger underlying earnings, with the board approving a final dividend of $0.45 per share, up 15.4% on last year. Franking credits remain sizeable, reflecting the strength of Australian profits and underlining management’s confidence in the sustainability of cash generation.

Sustainability and AI embedded in operations

Woolworths flagged several sustainability milestones, including achieving 100% renewable electricity across its operations and restoring soft‑plastic recycling to more than 600 stores. AI is increasingly embedded in the business, with customer chatbots handling over 60% of contacts and Gemini tools used by most support‑office staff and thousands of store team members each week.

Customer metrics and availability move higher

Customer experience indicators improved sharply, with Woolworths Food Retail’s net promoter score up 10 points year on year and value‑for‑money scores rising 8 points. Better stock management and promotional planning lifted availability, as reflected in a 10‑point improvement in the out‑of‑stocks customer score.

Remediation charges weigh on reported earnings

One of the few dark spots was a large remediation provision following a Federal Court decision on award‑covered salaries, booked as $698 million of significant items before tax. Including these items, NPAT attributable to owners fell 49.4% to $374 million and reported EPS declined by the same percentage, masking the otherwise strong operational performance.

Supply chain transition costs to linger

The ongoing rollout of new supply chain infrastructure is still weighing on near‑term profit, with dual‑running and commissioning costs dampening both comparability and normalized EBIT. Management cautioned that these transition costs will likely persist through FY26, with the full benefits from automation and new sites expected closer to FY28–FY29.

Margins pressured by mix shifts and input costs

Excluding tobacco, group gross margin slipped 14 basis points year on year as Woolworths leaned into complementary businesses and invested in lower shelf prices to support customers. Some categories also faced supplier price and weather pressures, particularly red meat and produce such as capsicum and strawberries, which constrained margin expansion.

Everyday needs categories still lagging

Not all categories are firing, with Everyday Needs areas such as parts of personal care, some baby lines and select pet subcategories described as underperforming. Management acknowledged that these ranges were slow to be adjusted historically and still require work on pricing and assortment despite early relaunch efforts now underway.

Intensifying competition in online and on-demand

The digital battlefield is becoming more crowded, with Woolworths pointing to heightened competition from rivals such as Coles, Amazon, Costco and third‑party delivery platforms. This is driving up customer acquisition intensity and putting pressure on pricing and service levels in food eCommerce and rapid delivery, demanding continued investment to defend share.

Other segment loss and softer property gains

The smaller ‘other’ segment posted a loss before interest and tax of $124 million, an increase of 16.3%, reflecting fewer property disposal gains in the period. The segment was also affected by a rebuild of the short‑term incentive provision, which weighed on reported profitability compared with the prior year.

Cash realization impacted by working capital timing

The cash realization ratio came in at 95%, below management’s target of more than 100%, due mainly to working capital timing. Payables movements in New Zealand and cash settlement of remediation provisions, along with tax timing effects, also contributed, while dividends in the half fell 53.5% year on year due to the absence of last year’s special payout.

Guidance and outlook remain constructive

Management reaffirmed guidance for mid‑ to high‑single‑digit EBIT growth in Australian Food for FY26 and a better performance in New Zealand Food and BIG W. They reiterated a medium‑term ambition for mid‑ to high‑single‑digit EBIT growth supporting double‑digit total shareholder returns, underpinned by $2.0 billion of FY26 capex, ongoing cost savings, growing eCommerce profit and a strengthened dividend.

Woolworths’ earnings call ultimately portrayed a business with strong underlying momentum but some sizeable near‑term headwinds from remediation and supply chain investment. For investors, the key message was that cash generation, cost discipline and digital growth are tracking well, and management is confident that today’s one‑offs and transition costs will pave the way for structurally higher earnings later in the decade.