Australian grocer Woolworths flags a challenging environment for fiscal 2025 By Reuters

(Reuters) -Australian grocer Woolworths on Wednesday lowered its earnings estimates from top operation Australian Food, warning of a tough road ahead for the firm as rising cost-of-living pressures and consumers with squeezed wallets curb spending.

The restricted trading update highlights a trend that has been prevalent in Australian retail, cost of living pressures, which is also driven by the central bank maintaining its key interest rates at a 12-year high.

Woolworths and smaller rival Coles, which reports quarterly sales on Thursday, together make about two-thirds of Australian grocery sales so their updates are widely viewed as indicators of consumer behaviour.

“Looking ahead, we expect customers to remain extremely value-conscious with cost-of-living pressures to continue for the remainder of FY25,” CEO Amanda Bardwell said.

The grocer expects to report first-half operating earnings in the range of A$1.48 billion ($970.73 million) to A$1.53 billion for its Australian Food segment. This includes the impact of A$40 million of incremental supply chain costs and compares to A$1.60 billion it reported for the same period last year.

Woolworths logged total group sales of A$18 billion for the September quarter, compared with A$17.22 billion a year ago, and beating a Visible Alpha consensus estimate of A$17.25 billion.

Its biggest earner, the Australian Food segment, posted a 3.8% growth in sales at A$13.60 billion during the quarter, as consumers bought more items due to moderation in food prices.

($1 = 1.5246 Australian dollars)