Why is the Woolworths share price sliding 7% today?

Aussie investors heed Target's inflationary warning…

| More on:
Sad person at a supermarket.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • The Woolworths share price is tumbling almost 7% lower on Thursday afternoon
  • Today's fall comes as US retail giant Target showed the damage toll from inflation in its first-quarter result
  • Investors are selling off Woolworths shares in response

The Woolworths Group Ltd (ASX: WOW) share price is in the doghouse today, joining a raft of other retailers.

In afternoon trade, shares in Australia's largest supermarket operator are down a considerable 6.8% to $34.735. If the pain continues, it will mark the worst one-day performance for the company since it split away from Endeavour Group Ltd (ASX: EDV) in June 2021. However, that fall in value was attributable to removing ownership value in the liquor retailer. To find a valid comparison, we need to go back to 31 March 2020, when it fell by 8%.

So why is one of Australia's biggest companies taking a plunge today?

Retail has a target on its back

A general concern for retail shares was set into motion last night after one of the most recognisable retailers in the world reported disappointing first-quarter numbers.

Ringing a warning bell on inflation, bricks and mortar retailer Target Corporation (NYSE: TGT) told shareholders that rising labour and freight costs took a bite out of the company's bottom line. On top of this, customers tightened their budgets during the quarter — perhaps due to inflation — resulting in reduced spend on discretionary items.

The challenges led to Target missing analysts' earnings per share (EPS) estimates by 28.5%. As a result, the retail stock fell a head-spinning 25% overnight — its biggest fall since 1987.

Back on Aussie markets, it appears ASX investors are taking Target's disastrous day as a cautionary tale for local retailers.

By the looks of it, the Woolworths share price is not immune to the concern. However, in its recent third-quarter results, Woolworths largely inferred that higher costs had been passed on to the customer. The company illustrated this in its Q3 results, stating:

Woolworths Retail sales benefited from a successful trade plan, including Prices Dropped on Healthier Products, elevated COVID impacted in-home consumption, and shelf price inflation due to input cost pressures.

Nonetheless, investors are being cautious today given the backdrop of the worrisome numbers from Target and Walmart.

Woolworths share price in review

The Woolworths share price is now barely hanging on to a positive return over the past year. At the time of writing, shares in the supermarket giant are up 1.3% in the 12-month period. Although, total returns (with dividends included) come to 10.8% during the same timeframe.

For comparison, Coles Group Ltd (ASX: COL) is up 8.2% compared to a year ago without including dividends.

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended COLESGROUP DEF SET. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Consumer Staples & Discretionary Shares

Businessman walking down staircase with suitcase, at sunrise
Consumer Staples & Discretionary Shares

How is the Domino's share price reacting to the CEO's departure?

Domino’s CEO Don Meij is stepping down after four decades with the pizza retailer.

Read more »

Young man sitting at a table in front of a row of pokie machines staring intently at a laptop. looking at the Crown Resorts share price
Consumer Staples & Discretionary Shares

Who unloaded $26 million worth of Star Entertainment shares?

They weren't prepared to bet on the company's future.

Read more »

A man looks a little perplexed as he holds his hand to his head as if thinking about something as he stands in the aisle of a supermarket.
Consumer Staples & Discretionary Shares

Should I buy Coles stock during this sell-off?

After its latest update, is this supermarket business a buy?

Read more »

A female Woolworths customer leans on her shopping trolley as she rests her chin in her hand thinking about what to buy for dinner while also wondering why the Woolworths share price isn't doing as well as Coles recently
Consumer Staples & Discretionary Shares

The Woolworths share price just hit a 52-week low: Is it a buy?

Is this stock in the bargain basket?

Read more »

Woman checking out new iPads.
Retail Shares

JB Hi-Fi share price lifts off on strong start to FY 2025

JB Hi-Fi held its AGM today and released its first quarter trading update.

Read more »

Woman shopping at a retail store.
Consumer Staples & Discretionary Shares

Coles share price climbs on Q1 update and $880m investment news

How did the supermarket giant perform in the first quarter? Let's find out.

Read more »

Woman smiles at camera at she buys greens from the supermarket.
Broker Notes

Are Woolworths shares a bargain buy after being sold off?

Let's see what Goldman Sachs is saying about this blue chip following its update.

Read more »

Supermarket worker looks upset.
Consumer Staples & Discretionary Shares

Woolworths share price crashes 6% after earnings fall 'below' expectations

Things aren't quite as positive as you'd expect for the supermarket operator.

Read more »