Woolworths has announced a notable increase in profits, reporting a 16.4% rise in underlying net profit to $859 million for the six months ending January 4, 2025. This growth is largely attributed to enhanced profit margins within its supermarket division, even as inflation pressures on household costs continue to mount.
In its latest half-year earnings report released on Wednesday, the company revealed an increase from $739 million during the same period last year. The results coincide with a looming legal challenge from the Australian Competition and Consumer Commission (ACCC), which has accused Woolworths and rival Coles of misleading customers through what it describes as “illusory” discounts on a range of everyday products.
The ACCC’s legal action against Coles commenced last week at the Victorian Federal Court, with Woolworths closely monitoring the proceedings. The regulator’s scrutiny has intensified around the pricing strategies employed by major supermarkets, as both Coles and Woolworths work to recover from reputational damage stemming from the ACCC’s investigation into their pricing practices.
Sales at Woolworths supermarkets grew by 3.6% to $27.6 billion during the half-year period. The profit margins in the grocery sector improved from 5.1% to 5.5%, a trend typically seen when the difference between retail prices and wholesale costs widens. Supermarkets often cite operational efficiencies as a reason for these margin increases.
According to ACCC analysis, Coles and Woolworths maintain profitability levels that surpass most of their international competitors, such as Tesco, Carrefour, and Kroger Co. As inflation continues to impact Australian consumers, the consumer price index rose by 3.8% in the year leading up to December 2024. Notably, spending on food and non-alcoholic beverages contributed 3.4% to this annual inflation figure, indicating the significant role of grocery prices in the broader economic landscape.
The ACCC’s upcoming case against Woolworths will further illuminate the dynamics of supermarket pricing in Australia, as consumers become increasingly aware of pricing tactics during times of economic strain. As these proceedings unfold, both Woolworths and Coles will need to navigate not only their financial performance but also the potential implications of legal scrutiny on their business practices.
