The Woolworths Group Ltd (ASX: WOW) share price has sank 5% after the supermarket business announced its FY25 first quarter update.
Woolworths FY25 first quarter
The company reported how its sales performed in the 14 weeks ending 6 October 2024, compared to the first quarter of FY24.
Woolworths reported that its group sales increased by 4.5% to $18 billion and group e-commerce sales jumped 21.2% to $2.4 billion. Sales excluding the acquired Petstock rose 3.3%.
The supermarket business said it offered customers more specials with larger savings, increased shelf capacity of its own brands, made it easier to find the best unit prices and provided extra value through Everyday Rewards.
Australian Food
Woolworths reported that its Australian food total sales rose 3.8% with a focus on value and improved availability. Customers remain “highly value-conscious and continue to purchase more items on special or trade down to lower priced items” including own brand.
Those competitive factors, together with strong e-commerce growth is leading to a lower margin sales mix, which has impacted earnings.
In October to date, total Australian food sales have increased 3%.
This division is key for the Woolworths share price, in my view.
Australian business to business (B2B)
Woolworths reported that its B2B sales increased 6.9%, with PFD sales growing by 7.8%. Third-party Primary Connect revenue was also “strong” according to Woolworths because of new cross-dock facilities.
The acquisition of the remaining 35% of PFD is expected to complete on 31 October.
New Zealand Food
Total sales in New Zealand increased 2.7% because of item growth and strong e-commerce with “stronger momentum in the second part of the quarter which has continued into October.”
The ASX share said the transformation of the business continues to gather momentum but trading conditions are expected to remain “muted”.
Other businesses
Big W sales were down 0.9% with solid item growth offset by lower average selling prices as it increased its range of opening price points, lowered prices and customers traded down to more affordable options. Trading over the rest of the second quarter “remains key”.
Petstock sales increased by approximately 5% year on year compared to period before Woolworths’ ownership.
Final thoughts on the Woolworths share price
Woolworths said Australian Food EBIT for the first half is expected to be below expectations, which is expected to fall from $1.595 billion in HY24 to between $1.48 billion to $1.53 billion in HY25.
It will be interesting to see how Woolworths responds to the current problems it’s seeing, including customers seeking value. I don’t think Woolworths is a top buy right now.
There are other ASX dividend shares that aren’t as challenged and more appealing, in my opinion
