Woolworths Group shares (ASX:WOW) hit a new high at A$41.19 on Wednesday, closing 3.42% higher on the day at A$40.18. The new ATH came after the company put up a strong set of FY26 results, showing profit growth running well ahead of sales. With Woolworths’ share price now up 36.53% since the turn of 2026, and offering a nice dividend to boot, there is plenty of outperformance in the stock aswell as the operations.
The rally follows the company’s FY26 release, with group sales of A$71.5 billion, up 3.6% from a year earlier, while EBIT before significant items rose 12.7% to roughly A$3.1 billion. That gap between revenue and earnings is the key signal as it suggests operating leverage is doing the heavy lifting, rather than volume growth alone.
Profit was the headline, with net profit rising 18% to A$1.14 billion, and return on funds employed improved toward the mid-teens. Operating cash flow before interest and tax reached roughly A$6.5 billion, while the cash realisation ratio moved above 100%. That strengthens the argument that the earnings recovery is backed by real cash generation, not just accounting momentum.
Woolworths also lifted its fully franked final dividend to 52 cents per share, taking the full-year payout close to 97 cents per share with a payout ratio in the mid-70s. In a market still sensitive to rates, bond yields and broader macro uncertainty, that combination of defensive earnings and yield can attract incremental capital.
There is also a sector read-through. Coles recently posted a strong NPAT surge and received a positive share-price response, which raised investor expectations for supermarket earnings quality. Woolworths matching that theme helps support the idea that staples earnings are holding up better than more cyclical parts of retail.
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The political and regulatory backdrop is less comfortable. Strong supermarket profits during a cost-of-living squeeze can draw attention from politicians and regulators, especially where pricing transparency, loyalty programs and supplier terms are already under review. Woolworths also still needs to show that weaker or more volatile areas such as Big W and New Zealand do not dilute the group’s broader earnings quality.
Price Targets
With WOW fading a little into the close, ~A$1 below the high of the day, the question now is how the market responds to what is an important psychological level at A$40. The bull case is supported by margin strength, cash conversion, dividend growth and a defensive earnings profile. The bear case rests on valuation, regulatory overhang and the risk that execution must remain close to flawless.
A break and hold of A$41 would be undeniably bullish, whilst a break below A$40 on meaningful volume could see some profit taking up at elevated levels. Either way, there will be plenty of eyes on this one heading into the final two trading sessions of the week.
Bull Case:
- Profit growth, margin control and cash flow support the defensive compounder thesis.
- Higher fully franked dividend may appeal to income-focused holders.
- Uptrend remains intact with price above key moving averages.
Bear Case:
- Consensus target of A$37.04 implies the stock is expensive versus average forecasts.
- Regulatory and political pressure could intensify around supermarket pricing and profits.
- Big W, New Zealand and execution risks matter more at a full valuation.
