Woolworths Group has reported a 4.5% increase in third-quarter sales to $18.1 billion, but the retail giant simultaneously warned of a potential hit to its profit margins.
Despite improved sales momentum in Australian Food, which saw a 5.9% rise to $13.8 billion, the Group signaled that earnings before interest and tax (EBIT) will likely land at the lower end of previous forecasts.
The downgrade reflects a "more uncertain" outlook as geopolitical instability in the Middle East begins to impact supply chains.
“Higher fuel costs and secondary effects are likely to have an increasing inflationary impact as we move through the calendar year,” said Woolworths Group CEO Amanda Bardwell.
She noted that the conflict is creating acute pressure at a time when "cost-of-living pressures are already acute".
The earnings squeeze stems from rising input costs, including incremental expenses tied to direct fuel exposures in the fourth quarter.
It also reflects price investment through ongoing efforts to support struggling households, including a new "Price Freeze" initiative.
Regional disruption adds pressure too.
In New Zealand, higher fuel costs and store operating model changes are expected to drive second-half EBIT below the prior year.
While sales remain resilient, Bardwell emphasized that the Group must now focus on "productivity and cost discipline" to navigate a rapid reduction in consumer confidence and mounting inflationary headwinds.