Why Woolworths (ASX:WOW) shares are down despite strong Q3 sales growth

3 min read | May 03, 2022 10:57 AM AEST | By Ashish

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Why Woolworths (ASX:WOW) shares are down despite strong Q3 sales growth — Image source: © Kiankhoon | Megapixl.com

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Highlights

Woolworths’ March quarter sales shot up 9.7% to AU$15.1 billion.

The retail giant’s e-commerce sales were up 33.4% to AU$1.5 billion.

However, the group’s BIG W business struggled.

Woolworths Group Ltd (ASX:WOW) on Tuesday reported robust sales for 13 weeks to 3 April 2022 despite ongoing supply chain disruptions. The March quarter (FY2022) sales of the supermarket chain rose 9.7% to AU$15.1 billion, while e-commerce sales jumped 33.4% to AU$1.5 billion, according to the company’s Q3 sales update.

Despite strong results, the stock was trading at AU$38, down 0.77% at 10:15 AM (AEST). The stock is down over 0.4% on a year-to-date (YTD) basis. However, in the past year, the stock has risen nearly 16%. The WOW share price is up nearly 4% in the past month.

The Group’s key Australian Food business reported a 5.4% rise in sales to AU$11,432 million, with a 4.4% comparable sales growth. Similarly, Woolworths Supermarkets quarterly sales grew 2.4% to AU$10 billion and Metro Food Stores sales rose 7.3% to AU$241 million. WooliesX B2C eCommerce sales reported a 38.1% growth to AU$1.1 billion.

The New Zealand Food business posted a 4.2% rise in sales to AU$1,736 million. The Australian B2B business reported a 217.3% rise in sales to AU$995 million. However, the Group’s BIG W business struggled and reported a 3.5% revenue fall to AU$989 million.

The Group also said that its total COVID-19 costs more than halved quarter on quarter to AU$66 million.

What does the company say?

Commenting on the sales numbers, Woolworths Group’s CEO, Brad Banducci, said that COVID-19 negatively impacted the company’s customer metrics. The high levels of COVID-related team absenteeism and the disruption to the broader supply chain led to inconsistent customer shopping experiences, he added.

“We have not yet seen a notable change in customer shopping behaviour but remain focused on providing our customers with great value for money. The timing of Easter negatively impacted reported sales growth but given the current volatility and COVID impact in both periods, we have not reported Easter-adjusted numbers,” he noted.

Outlook

Woolworths didn’t share any fiscal guidance for the full year. However, it said that the third quarter had begun on a positive note.

“For the remainder of the second half, we are focused on returning to a more stable operating rhythm and delivering consistently good shopping experiences for our customers,” the company said.

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