Woolworths Holdings Limited

Analyst thesis

Our recommendation is based on:

• Food remains a core earnings anchor: Food continues to be the stabilising element of the Woolworths Holdings Limited’s (WHL) business and has been the largest contributor to revenue, particularly since the sale of David Jones. Top-line growth over the last five years has been driven by premium positioning, supporting like-for-like (LFL) growth as price inflation ranged from 3.5% to 8.3%, despite some volume fluctuations. Food accounts for 65% of revenue, reinforcing the segment’s position as a stabilising anchor for the group. We anticipate this premium positioning to remain part of WHL’s competitive advantage in the food space.

• Improving sales in the Fashion, Beauty and Home (FBH) segments: FBH remains a potential growth lever, with these categories focus on full-priced sales. This strategy has largely resulted in fewer discounts and higher price inflation, ranging from 6.0% to 11.6% annually over the last five years, which has slowed to 2.4% in FY26. Although Beauty and Home are seeing strong revenue growth, operating expenses have also increased, and inventory-control measures have recently weighed on operating profit.

• Potential recovery in Australian trading conditions and Country Road Group (CRG) turnaround: CRG is positioned as another potential lever for growth, although this has been constrained by the challenging macroeconomic environment in Australia. The segment recorded positive LFL sales growth and benefits from a higher online contribution to revenue of 27.8%. The operating-model reset has returned the segment to an operating profit from a loss in the prior period, but the operating environment in Australia remains a looming risk.

• WHL’s NTM P:E is trading at a 24% discount relative to both the five- and 10-year averages. The derating of the multiple may reflect the slower recoveries of the FBH and CRG segments which are less stable than Food. This presents an opportunity to gain exposure to a stable core part of WHL, with Food accounting for 65% of revenue with potential upside from a re-rating driven by turnaround strategies in the non-Food segments, although progress has been slower than the market initially anticipated.