Why Woolworths (WOW) shares are selling off today
WOW -9.57%: Woolies has come out with a disappointing trading update this morning that is weighing on shares across the three major supermarket exposed stocks on the ASX. The company expects EBIT for the first half to come in well below expectations at around $1.2b despite sales remaining strong, weighed on by higher COVID costs and the issues its caused in the supply chain as well as the poor weather particularly seen in NSW. The CEO called it “one of the most challenging halves we have experienced in recent memory” in the update with costs as a result of the pandemic higher than the peak of lockdowns last year. These costs are likely to subside into the second half and a strong festive trade is expected to lift the full year result however this update leaves them far behind full year consensus expectations of $2.95b EBIT that’s currently priced in. Also out today was a piece from Jefferies analyst Michael Simotas who posed that Woolies EBIT would take a 12% hit if Australia was to adopt a similar tobacco crackdown as seen in New Zealand. Coles would be most impacted with a 14% hit.