Woolworths Group saw its underlying profit drop by 19% for the full year. This decline is largely due to cost-of-living pressures impacting spending in their Australian Food and BIG W divisions. For the year ending 29 June, net profit after tax was A$1.39 billion. This is down from A$1.71 billion last year, but it aligns with the expected A$1.38 billion.

Woolworths Profits Meet Expectations

Woolworths’ A$1.39 billion profit was expected, and the market had already factored in this 19% decrease. Because the results met forecasts, we expect the stock’s implied volatility to decline in the coming days. This “volatility crush” is an opportunity for those selling options instead of buying them. The main issue remains the cost-of-living pressure, which is limiting how much consumers spend. Recent data supports this, showing Australian retail sales grew by only 0.2% in the June 2025 quarter. This is the slowest growth since the post-pandemic recovery began in 2023, suggesting consumer-facing stocks like Woolworths are unlikely to see a big rally. Additionally, the Reserve Bank of Australia seems to be holding steady. The latest inflation rate from July 2025 was 3.8%, still above the target range. This means households likely won’t get interest rate relief in the coming months, keeping their budgets tight. We think this will limit real earnings growth for retailers through the end of the year. Given this situation, we recommend strategies that profit from the stock moving sideways or slightly lower. Selling out-of-the-money covered calls on existing stock could generate income while the share price remains stable. Another option is a bear call spread, which allows for profit from a slight decline or sideways movement with limited risk.

Market Strategy for Woolworths

We saw a similar trend in late 2023 when consumer confidence fell to multi-year lows. During that time, Woolworths and its competitors experienced flat stock prices for several months. Traders who sold premium during price increases were more successful than those hoping for a significant breakout or breakdown. The challenges facing Woolworths reflect the entire sector, as competitors are also noticing cautious spending habits. This supports our belief that a neutral, income-generating trading environment is more suitable. We are positioning ourselves for a market that rewards patience over aggressive strategies in the coming weeks. Create your live VT Markets account and start trading now.

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