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Supermarket giant Woolworths Group (ASX: WOW) has warned that supply disruptions and surging fuel costs stemming from the conflict in the Middle East are creating greater uncertainty for customers, suppliers and staff, even as it posted a 4.5 per cent increase in third-quarter sales to $18.1 billion.
The cautious outlook accompanied an announcement that Woolworths will freeze shelf prices on 300 own-brand household staples from 1 May for three months, pledging to absorb rising supplier costs on those items as inflationary pressures build across the economy.
CEO Amanda Bardwell says the geopolitical turmoil is already filtering through to the cost base, with higher fuel prices and secondary effects likely to have an increasing inflationary impact over the remainder of the year.
"The conflict in the Middle East is creating greater uncertainty for our customers, suppliers and team at a time when cost-of-living pressures are already acute," says Bardwell.
"While the impact on the group to date has been limited, higher fuel costs and secondary effects are likely to have an increasing inflationary impact as we move through the calendar year.
"By putting customers first and maintaining a strong focus on productivity and cost discipline, I am confident we can navigate the current environment to continue to build a stronger, more resilient business while balancing the needs of all our stakeholders.“
The warning comes as the Australian Bureau of Statistics this week reported headline CPI surged to 4.6 per cent annually in the March 2026 quarter, up sharply from 3.7 per cent in February, driven largely by a 24.2 per cent annual rise in automotive fuel prices.
The monthly fuel price increase of 32.8 per cent was the strongest since the ABS series began in 2017, while broader transport costs climbed 8.9 per cent annually.
Despite the darkening outlook, Woolworths' Australian Food division delivered a strong quarter, with sales hitting $13.8 billion - up 5.9 per cent, or 7.3 per cent excluding the ongoing impact of tobacco regulatory changes. E-commerce sales across the group surged 20.2 per cent to $2.7 billion.
Bardwell notes that building inflationary pressures did not have a material impact in the third quarter data with average prices declining on the prior year, but the forward-looking picture has shifted markedly.
The company narrowed its Australian Food FY26 EBIT guidance, still expecting mid-to-high single digit growth but no longer at the upper end of that range due to incremental fourth-quarter fuel costs and investment in the price freeze initiative.
BIG W sales rose 3.9 per cent in the quarter, with Bardwell flagging increased customer caution in discretionary spending as cost-of-living pressures mount.
The price freeze covers essentials including bread, pasta, rice, canned vegetables, cleaning products and personal care items across Woolworths' own-brand range.
"Our primary focus since March has been to take the necessary steps across the group to minimise the impact on customers, while also recognising the genuine cost pressures being felt by our suppliers and transport partners," says Bardwell.
“Fundamental to our plans is our group-wide commitment to making every dollar count and becoming a more efficient and resilient business as we outlined in August.
"At a time when many household budgets are under pressure, we want to give our customers confidence that the everyday essentials they rely on won't be going up in price.
"We will absorb rising supplier costs on these products so our customers don't have to."
The third-quarter update follows a strong first half for the group announced in February when Woolworths reported group EBIT before significant items of $1.66 billion, up 14.4 per cent, and net profit after tax before significant items of $859 million, up 16.4 per cent.
Shares in Woolworths were trading 7 per cent lower at $34.65 at 2.39pm (AEST).
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