Woolworths Group (ASX:WOW) reported "solid" fiscal third quarter sales growth but flagged softer earnings guidance and rising pricing pressures, pointing to margin strain and a more cautious earnings outlook, Jefferies said in a Thursday note.
The company reported Australian food like-for-like sales growth of 5.3% in the fiscal third quarter, slightly ahead of Jefferies estimates of 4.9%, supported by strength in fresh and private-label ranges, with total sales up 5.9% and food retail sales excluding tobacco rising 7.3%, despite a 42% decline in tobacco revenue.
The company lowered its fiscal 2026 Australian food earnings before interest and taxes growth outlook due to fuel cost pressures and pricing investments despite strong sales, while in New Zealand it expects weaker second-half earnings but still projects fiscal-year growth over last year.
The equity research firm said that higher fuel costs have only a modest impact and suggested the larger earnings downgrade likely reflects potential pricing investment, even though current competitive conditions do not justify aggressive discounting.
The research firm highlighted that online sales rose around 24% year on year, adding AU$435 million in incremental sales and lifting penetration to a record nearly 17%.
The research firm noted softer customer metrics, with net promoter scores falling to 47 from 52 after five quarters of gains amid post-holiday normalization, volatility, and weaker sentiment.
Jefferies maintained a hold rating on Woolworths Group and lowered the price target to AU$32 from AU$33.50.