Woolworths posts 4.5 per cent jump in sales for Q3, but warns fuel shock will hit profits

Woolworths Group has posted a 4.5 per cent jump in quarterly sales but flagged the conflict in Iran will have greater effect on the business later in the year. Delivering its results to the Australian share market on Thursday, the supermarket giant recorded a 4.5 per cent increase in sales to $18.1bn across the supermarkets and Big W for the third quarter of the financial year. In the results, chief executive Amanda Bardwell said more acute effects of the conflict in Iran were expected to wash through into Woolworths’s accounts later in the year. “We are seeing early signs that the conflict in the Middle East is impacting our customers and team, many of whom were already experiencing significant cost-of-living pressures,” she said. “While the impact on the group to date has been limited, higher fuel costs and secondary effects are likely to have an increasing inflationary impact as we move through the calendar year.” Woolies has announced a three-month price freeze on 300 items, including Woolworths brands of hot roast chicken, soft bread range, chicken breast fillets, sausages, past and nappies. The price freeze will come into effect on Friday. “The conflict in the Middle East has brought a new wave of uncertainty, and we’re hearing from our customers that they’re worried about what it means for their household budget,” Ms Bardwell said. “While we don’t know how long these challenges will last, or what the full impact of higher costs will be on our customers’ favourite products, we know a little certainty can go a long way. “We’ll invest to absorb any extra costs that are agreed with suppliers on these products to make that happen.” In a three-month span where Woolworths closed one supermarket and one smaller Metro outlet, Australian food sales rose 5.9 per cent to $13.8bn. But average prices at the company’s Australian food businesses fell 1 per cent – excluding tobacco. The company notes lower prices for home essentials, fruit and snacks driving the average price fall, “somewhat offset by ongoing cost pressures” for meat. Fresh food sales rose 8 per cent, with “double-digit” growth for meat and seafood. The financial results note “some signs of increased customer caution” weighing on sales figures. Woolworths is also downgrading its Australian food retail earnings growth forecast to “the mid to high single-digit range but no longer at the upper end of the range”. Some 400,000 more Australians have signed up for Woolworths’ loyalty program over the past 12 months. Tobacco sales have plummeted 42 per cent over the past year. The update comes one day after the latest inflation figures showed costs across the economy had risen to 4.6 per cent in the past year. The Australian Bureau of Statistics says transport, housing and then food and non-alcoholic beverages had been the main drivers. Food inflation is running flat at 3.1 per cent in annual terms, and shot up 0.7 per cent from February to March but 0.4 per cent seasonally adjusted. For the year to March, the nationwide figures show meat and seafood prices rose 4.8 per cent, driven by beef and veal (up 11.8 per cent) and lamb and goat rose 15.5 per cent on the back of strong overseas demand for Australian red meat. Fruit and vegetable prices have risen 1.8 per cent in the year to March, mostly because of a 4.3 per cent spike in strawberries, blueberries and apples, the ABS data shows. Snack and confectionery prices have also risen 5.7 per cent in the past year. Ms Bardwell is scheduled to field questions from the media later on Thursday morning. More to come