Woolworths Shares Slip on Abrupt CEO Exit, Trading Update

Shares of ASX-listed grocer Woolworths Group Ltd. (AU:WOW) slipped 6.7% this morning following an abrupt CEO departure and trading update. Managing Director and Group CEO Brad Banducci will step down from his role effective September 1, 2024, amidst a slew of political pressure on grocery prices and inquiries into the grocery sector. Amanda Bardwell, head of the company’s digital arm, WooliesX, will succeed Banducci as the new CEO.

Woolworths Group is one of Australia’s largest grocery chains. It operates supermarket stores in Australia and New Zealand as well as a discount department store called Big W.

WOW shares have lost over 10% in the past year, including today’s share price loss.

Woolworths’ H1 FY24 Results

For the first half of Fiscal 2024, Woolworths, also called Woolies, posted revenues of AU$34.64 billion, up 4.4% compared to the prior-year period. The company’s sales received a lift from its Australian Food unit, which saw a 5.4% jump in sales compared to the prior year. New Zealand Food sales rose by 4.2% (or 2.3% growth based on sales in New Zealand dollars), while Big W’s sales declined by 4.1% in H1 FY24.  

Meanwhile, the grocery chain posted a net loss after tax and extraordinary items of AU$781 million in H1 FY24, compared to a profit of AU$845 million in the prior-year period.

On a positive note, Woolworths’ board declared a fully franked interim dividend of AU$0.47 per share, up 2.2% from the interim dividend in 2022.

Last month, Woolies had warned of the impact of extraordinary charges on its H1 FY24 results. These were mainly related to the impairment of its New Zealand business and a change in the accounting treatment of its equity investment in Endeavour Group (AU:EDV). 

Recent Trends

Looking ahead, Banducci said that for the first seven weeks of H2 FY24, sales have continued to moderate with lower inflation and price-sensitive consumers. Australian Food retail sales grew 1.5%, while NZ Food sales rose roughly by 1% during this period. On the contrary, Big W sales have fallen by 6% in the first seven weeks.

Turning toward the CEO departure news, Banducci boasts a 13-year-long work relationship with Woolies and was the CEO for more than eight years. Woolies has been under constant pressure from the Australian competition regulator to scan if the company is leveraging its market position to expand its profits at the cost of inflation-stricken customers.

Is WOW Stock a Buy or a Sell?

With two Buys, one Hold, and two Sell ratings, WOW stock has a Hold consensus rating on TipRanks. The Woolworths Group Ltd share price target of AU$35.44 implies 6.1% upside potential from current levels. As a caveat, all these ratings were given before the CEO exit news and trading update and hence, are subject to change.

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