Woolworths Group (ASX:WOW) has reported Q3 FY26 group sales of A$18.1 billion, up 4.5% on the prior year. Australian Food drove the result through 5.9% top-line growth, with eCommerce sales growing 23.8% and Everyday Rewards active members reaching a record 10.7 million.
The harder part of this update sits in the outlook section. The conflict in the Middle East is creating fuel cost exposure for Woolworths, and management has flagged that higher fuel and secondary inflationary effects are likely to become an increasing headwind through the calendar year.
Australian Food EBIT growth for FY26 is now expected to land in the mid to high single digit range but no longer at the upper end. That is a downgrade in framing, even if the absolute guidance still looks solid.
New Zealand Food is a weaker point. Growth of 1.4% in NZD terms reflects a highly competitive market with discounters benefitting from flight-to-value behaviour. Management has flagged that H2 FY26 EBIT in New Zealand will be modestly below H2 FY25 because of lower sales growth, higher fuel costs, and disruption from a new store operating model. The full-year NZD EBIT is still expected to be above FY25, but the trajectory has softened noticeably.
Australian Food’s 5.9% Growth Masks a Tobacco-Adjusted Story Worth Watching
Australian Food Retail sales growth of 7.3% excluding tobacco is the cleaner number for investors to anchor on. Tobacco sales declined 42% on the prior year, which is compressing the headline figure significantly and will continue to do so as the category fades further.
The underlying food and fresh business is growing at a rate that reflects genuine volume and item growth rather than price-driven inflation.
Comparable sales growth of 5.3% was driven by transaction and item growth rather than average price increases. Average prices excluding tobacco actually declined 1.0% on the prior year, which is an unusual combination with strong sales growth.
It suggests Woolworths is gaining volume partly through price investment, and management confirmed this is intentional through trade investments in Everyday Rewards offers and promotional programs.
eCommerce penetration reached 16.6% of food retail sales in Q3, up 2.4 percentage points on the prior year. On Demand delivery, where orders are fulfilled within two hours, now accounts for 47% of delivery sales, up 8 points year-on-year. That shift matters because faster delivery is a service differentiator that supports higher basket retention and member engagement.
BIG W Steady, Petstock Continues to Grow at Pace
BIG W total sales increased 3.9% in Q3 or 1.1% on an Easter-adjusted basis, with quality of sales remaining strong through higher full-price sell-through in Clothing. The business remains on track for positive EBIT and cash flow in FY26, which is the right benchmark given where BIG W was positioned 18 months ago.
Petstock sales grew 15.9% in Q3, supported by new store openings and the acquisition of own-brand pet food businesses in the prior year. Comparable sales grew approximately 4%, driven by eCommerce price investment and the launch of the new Pet Cash loyalty program. The Billie’s Bowl own-brand launch in Woolworths Supermarkets is an early move toward leveraging the Petstock brand portfolio across the broader group.
Investors’ Takeaway for Woolworths Group
The Q3 result confirms the core Australian Food business is in better shape than it was a year ago, with strong item growth, rising digital engagement, and record loyalty membership providing a solid commercial foundation. The fuel and inflation headwinds flagged for Q4 are real, but they are external and cyclical rather than structural problems with the business.
The more important question for investors is how much the Middle East conflict affects cost inputs and consumer sentiment through the second half of calendar 2026. Woolworths has already pre-announced a Price Freeze program, which implies the company expects elevated consumer caution and is choosing volume protection over near-term margin defence. That is the right strategic call if the inflation cycle extends, but it adds risk to the EBIT guidance corridor.
New Zealand Food remains the part of the portfolio that needs to be watched most closely. If the operating model disruption continues into H2 and market conditions in New Zealand remain competitive, it could underperform expectations even relative to the now-lowered guidance. More analysis of ASX-listed consumer and retail stocks is available at Stocks Down Under.
