XM does not provide services to residents of the United States of America.

Woolworths and Coles FY24 earnings to show challenging outlook for supermarkets



<html xmlns="http://www.w3.org/1999/xhtml"><head><title>PREVIEW-Woolworths and Coles FY24 earnings to show challenging outlook for supermarkets</title></head><body>

By John Biju and Sneha Kumar

Aug 26 (Reuters) -Earnings of Australia's top supermarket chains are likely to show constricted spending presenting a challenging outlook for Woolworths WOW.AX and Coles COL.AX, as consumers deal with painfully high mortgage rates and sticky inflation.

Decade-high interest rates and stubborn inflation still running above the central bank's target range has prompted consumers to be mindful of their spending, analysts warned.

The results will show the impact of a protracted cost of living crisis on the companies, which ring up two-thirds of every Australian dollar spent on groceries and are closely watched as barometers of the wider economy.

Consumers are becoming more discerning by trading down in items such as food by choosing lower-priced items and more at-home consumption, UBS analysts wrote in a note.

Woolworths and Coles "face headwinds over the next 12 months because it's unlikely the economic outlook will improve due to the higher rate environment," said Kyle Rodda, senior financial market analyst at Capital.com.

The softening in consumer demand should be reflected in their earnings, he added.

Woolworths is set to report annual results on Aug. 28 while smaller rival Coles will report on Aug. 27. Analysts on average expect Coles to fare better.

Coles has said it expects more volume growth after a surge in supermarket sales in the third quarter in contrast to Woolworths which posted weak food sales.

"With cost-of-living pressures remaining a hot topic, I expect that the profit margins of the big supermarket chains will again be under the microscope," said Tim Waterer, KCM Trade's chief market analyst.

Jefferies analysts see underlying earnings margin expansion for Coles, rebounding from a period of margin contraction in the prior year and due to benefits from initiatives to connect brands with customers.

Meanwhile, Australian food underlying earnings margin for Woolworths is expected to contract due to increased business costs and supply chain investments.

Net profit after tax (NPAT) from continuing operations for fiscal 2024 is expected to come in at A$1.10 billion ($737.99 million) for Coles, slightly higher than A$1.04 billion in the prior year, according to Jefferies' estimates.

However, NPAT before significant items for Woolworths is expected to decline to A$1.67 billion, from A$1.72 billion last year.

Woolworths could also announce a special dividend along with its annual results, from the proceeds of its stake sale in liquor store and pub operator Endeavour Group EDV.AX, according to analysts.


($1 = 1.4905 Australian dollars)



Reporting by John Biju and Sneha Kumar in Bengaluru; Editing by Byron Kaye and Rashmi Aich

</body></html>

Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.

All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.

Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.

Risk Warning: Your capital is at risk. Leveraged products may not be suitable for everyone. Please consider our Risk Disclosure.