Why Woolworths’ EBIT Slipped 12.6% Despite 3.6% Sales Growth in FY25

• 3.6% normalised sales growth to $69.1 billion
• 12.6% normalised EBIT decline to $2.75 billion
• Significant impairments of $569 million related to BIG W, MyDeal, and Healthylife
• Final dividend cut 21.1% to 45 cents per share
• FY26 outlook targets profit growth driven by Australian Food, New Zealand Food, and BIG W recovery

Overview of FY25 Performance

Woolworths Group Limited released its full year results for the 52 weeks ended 29 June 2025, revealing a mixed performance amid a challenging retail environment. Group sales grew by a normalised 3.6% to $69.1 billion, reflecting steady consumer demand and strong eCommerce growth. However, earnings before interest and tax (EBIT) declined by a normalised 12.6% to $2.75 billion, primarily due to weaker contributions from the Australian Food and BIG W segments.

The group faced headwinds including industrial action, supply chain commissioning costs, and competitive pressures that compressed margins and profitability. Despite these challenges, segments such as New Zealand Food and Australian B2B delivered robust EBIT growth, highlighting pockets of strength within the diversified portfolio.

Segment Highlights and Strategic Actions

Australian Food, Woolworths’ cornerstone business, saw sales increase by a normalised 3.1%, with eCommerce penetration reaching a record 15.1%. Customer satisfaction metrics improved in the second half, supported by initiatives like the Lower Shelf Price program and enhanced retail execution. Nevertheless, EBIT declined by a normalised 10.5%, impacted by wage inflation, supply chain disruptions, and price investments to restore value perception.

BIG W experienced a difficult year, with sales broadly flat on a normalised basis and a significant EBIT loss of $35 million. The segment’s performance was hampered by a shift to lower-priced items, clearance activity, and challenges in the Clothing category. Woolworths announced plans to transition BIG W to a standalone technology platform to better align systems with its discount department store model and improve operational efficiency.

New Zealand Food rebounded strongly with EBIT up a normalised 40.6%, driven by ongoing transformation efforts and improved customer engagement. Australian B2B also posted solid EBIT growth of 15.8%, benefiting from margin improvements and expansion in third-party supply chain services.

Impairments and Cost Savings

The group recognised significant non-cash impairments totaling $569 million related to BIG W, the closure of the MyDeal customer website, and Healthylife, reflecting underperformance and strategic refocusing. Additionally, restructuring and redundancy costs of $146 million were incurred as part of cost-saving initiatives aimed at simplifying the operating model and reducing above-store expenses.

Woolworths remains on track to deliver $400 million in above-store cost savings by the end of calendar 2025, targeting a leaner, more agile organisation. Supply chain transformation projects, including the opening of new distribution centres in Moorebank and Auburn, are progressing as planned and expected to yield double-digit returns by FY30.

Dividend and Outlook

The board declared a final fully franked dividend of 45 cents per share, down 21.1% from the prior year, reflecting the earnings decline. The group expects FY26 to be a transitional year with a return to profit growth anticipated, driven by Australian Food’s recovery, continued momentum in New Zealand Food, and BIG W’s repositioning efforts.

Near-term challenges include an accelerated decline in tobacco sales impacting EBIT by $80–$100 million and approximately $60 million in costs related to retail system replacements. Nonetheless, Woolworths is confident that its strategic priorities, restoring customer trust, simplifying operations, and focusing on core food retail, will underpin sustainable long-term growth and shareholder returns.

Bottom Line?

Woolworths faces a pivotal FY26 as it seeks to translate strategic initiatives into profit growth amid ongoing market pressures.

Questions in the middle?

• How effectively can Woolworths turnaround BIG W’s performance with its new standalone technology platform?
• What impact will the accelerated decline in tobacco sales have on overall profitability beyond FY26?
• Can Woolworths sustain eCommerce growth momentum while managing supply chain transformation costs?