Woolworths (ASX:WOW): The Amanda Bardwell era is well underway, but will FY26 be the year it regains lost ground to Coles?

The Amanda Bardwell era at Woolworths (ASX:WOW) began in September 2024 after 8 years of Brad Banducci.

Several months into it and things do not appear to be much better for the Fresh Food People. But are things about to change?

Introduction to Woolworths

OK, it doesn’t need an introduction. It is a chain of Australian supermarkets and our nation’s biggest. But it also has stores in New Zealand (albeit stores that were known as Countdown for about a decade before reverting recently, but that’s a story for another time), as well as the Big W discount stores, delivery app Milkrun (which was acquired out of administration in 2023), MyDeal, healthylife and Petstock. Its Everyday Rewards scheme is a business in its own right too, it also includes insurance and mobile plans.

Of course, it is the Australian retail stores that remain the biggest part of the business.

Out with Brad Banducci, in with Amanda Bardwell

It has been a difficult time for Woolworths and supermarkets generally. It copped scrutiny for alleged price gouging and while it has never been proven to, the mere fact that an inquiry was held and it recommended a Code of Conduct stings. Banducci did not handle the scrutiny the company faced as well as he could’ve – most notably walking out of an interview with the ABC’s Four Corners.

Bardwell stepped up into the hot seat last year having previously been head of loyalty and e-commerce. Woolworths’ FY24 results were not terrible, but they were inferior to Coles. For the second half of FY24, sales in Woolworths’ food division grew just 1.8%, and 3% in the first 8 weeks of FY25. For Coles, these figures were 5.2% and 3.7% respectively.

Coles’ profit grew 8.3% to $1.1bn, even not accounting for the sale of its convenience stores to Viva Energy, although this was only a 2.6% margin. Woolworths profit was $108m, down 93% from the year before. Granted, this included impairments on its New Zealand supermarkets, but its pre-impairment profit was 0.6% down too, at $1.7bn, representing a 2.5% margin.

Looking to consumer surveys, a UBS survey from March saw Coles rank above Woolworths for the first time ever. It was a thin margin 38% vs 37%, but the Fresh Food People’s share was 44% pre-COVID. Of course, this is only sentiment, but it does magnify that the company has a reputational problem with shoppers bad enough for a significant proportion to turn away.

Woolworths shares are up 8% in 5 years while Coles shares are up 41%. In the 2025 year to date, these figures are 5% and 14% respectively. That sums things up.

But of course, Coles is not the only competitor. Aldi is too, not to mention Chemist Warehouse and Amazon – you can get many items from supermarkets from them as well.

Action stations

Bardwell is taking a leaf out of Coles’ book and is looking to follow it on discounts. Rather than offer shallower discounts on a broader range of items, Coles is offering larger discounts on a small number of items.

Specifically, the company has announced a $400m cost-cutting program and even though some of this would come from office expenses rather than stores, this could be reinvested into the business.

The savings would not only come from supermarkets, but also from Big W. Just look at the call to scrap the Everyday Rewards discount at Big W, on the basis that consumers would purportedly get better deals. And there is precedent for cost-cutting to happen – it did when Banducci took over in 2016.

More needs to be done

There have been another trio of secrets to Coles’ success. The first is that it has invested in home-brand products, so money-strapped consumers see these as an alternative to dining out.

Secondly, it has invested heavier in fulfilment centres to meet the needs of online shoppers. It did a deal with Ocado, a retail technology company, to use AI, advanced robotics and automation in these facilities. Although the commissioning came 12 months late and $120m over budget, its open now – better later than never.

And the third is a lack of industrial disputes – at least at the moment. The Fresh Food People saw a 17-day strike at its distribution entres towards the end of last year that resulted in a loss of $100m in sales.

Conclusion

We think we need to see either upward momentum, or more actions implemented to be confident to invest in it right now. The mean target price amongst analysts is barely 50c above the current $32.19 price (intraday of May 16). The company is trading at 3.2x PEG for FY26 and its EBITDA is expected to retreat by $250m in that year. All this doesn’t scream ‘Invest!’ in our book.

What are the Best ASX Stocks to invest in right now?

Check our ASX stock buy/sell tips