Woolworth shares finished at a 17-month high on Wednesday after the retailer delivered an underlying net profit of $859 million for the 27 weeks to January 4, up 16.4 per cent from a year ago and 6.6 per cent ahead of consensus expectations.
Sales rose 3.4 per cent to $37.1 billion while underlying earnings before interest and tax climbed 14.4 per cent to $1.66 billion.
A measure of customer loyalty known as a net promoter score was at 52 for its Australian supermarkets as of December, up 10 points from a year ago.
Woolworth shares rose 13.0 per cent to $35.63, their highest level since September 2024.
Bank of America analyst David Errington, known for his hard-hitting questions, called the company's performance a "fantastic result" and "phenomenal turnaround", with Woolworths cutting costs while driving productivity.
"What really stands out for me is that you've nailed the execution," he told chief executive Amanda Bardwell during an earnings briefing on Wednesday.
"I remember talking to you at the end of August, and one thing that concerned me is that you were very slow to respond to changes in the marketplace ... you seem to have been able to turn that around."
Ms Bardwell said that the significant leadership changes Woolworths had made at its Australian supermarket operations to cut costs had caused a high level of disruption at the time.
"I (don't) want to make any excuses for that, but I do think that was the biggest determining factor around our performance during that period," she said.
The slimmed-down management team is now focused on delivering for customers and rebuilding momentum, Ms Bardwell said, although there is more work to be done.
She said Woolworths had added more than 350 new products to its lower shelf price program, increasing its range to over 800 products, and made changes to improve the availability of fresh baked items, fruits and vegetables.
"We know that fresh (food) is the gateway of the supermarket shop," Ms Bardwell said.
Sales at Woolworths' supermarkets were up 3.6 per cent to $27.6 billion during the half, while Big W sales rose 1.8 per cent.
Big W, which has weighed on Woolworths' bottom line in recent years, is on track to be cash-flow positive in 2025/26.
Through its partnership with Google, Woolworths plans to transform its AI chatbot Olive into a "market-leading conversation shopping companion" sometime in the second half.
Woolworths set aside $710 million to deal with fallout from an unfavourable Federal Court ruling in September.
The ruling involved 27,000 Coles and Woolworths in-store managers who received annual salaries with "set-off clauses" to meet award entitlements, like overtime and penalty rates.
The court said that such clauses were only valid within a single pay cycle and that higher pay in one pay period could not be used to offset a shortfall in another, a decision which had major implications for Australian employers.
Woolworths set aside $406 million in potential remediation for team leaders, plus another $304 million for interest, superannuation and payroll taxes.
Including the impact of that remediation, Woolworths' net profit was down 49.4 per cent to $374 million.
EToro market analyst Josh Gilbert said while the result wasn't a smoking gun to silence every critic, it was a sign of things starting to turn around for Woolworths.
It comes after a tough couple of years that included cost-of-living pressures, industrial action and intense competition for market share.
The market will have a much clearer picture of how the grocery wars are playing out once Coles reports on Friday, he added.
Woolworths will pay an interim dividend of 45 cents per share, up 15.4 per cent from a year ago.
21°C