Woolworths' Market Share Recovery Now Faces a Valuation Test

Fund managers say a genuine operational turnaround has driven the stock to a valuation some now see as fully priced

20 Jun 2026 · 5 min read

A leadership reset and pricing reinvestment helped Woolworths Group claw back years of lost market share to Coles, driving one of the sharpest re-ratings in the retail sector, before fund managers began questioning whether that recovery was already fully priced in.

A tough year of losses and lost share

Pendal Group's August 2025 update described a difficult FY25 in which profits fell 17 per cent, with distribution centre strikes contributing to a loss of market share. Alliance Bernstein's September update confirmed the pattern, with FY25 results below expectations, a weak trading update indicating continued market share losses to Coles, and FY26 guidance falling short on higher-than-expected costs. First Sentier Investors saw the operational disruption as prompting a genuine reset, with new management resetting both the leadership team and strategic direction, and a need to invest in more competitive pricing to win back lost customers.

Early green shoots build into a genuine turnaround

Perennial Partners moved overweight in October 2025 after a third-quarter update showed tentative signs of life, and by November reported shares outperforming as investors rotated toward consumer staples in a more risk-off environment, arguing the operational issues, while real, were becoming increasingly reflected in the price. Ten Cap's January 2026 update argued risk-reward had improved meaningfully at current levels, particularly relative to Coles, where Ten Cap saw more limited margin upside, framing Woolworths as offering defensive earnings, cash flow stability and improving operational traction.

A strong half-year result confirms the recovery

Wilson Asset Management's February 2026 update reported a high-quality interim result, with strong sales growth carrying through into early 2026 and early signs the company had regained market share. Perennial Partners confirmed shares rallying 16.4 per cent that month following the result, which showed improved momentum after the period of share loss to rivals. Ten Cap's own February update described actively rotating from Coles into Woolworths as a pair trade, betting on the relative improvement in earnings momentum, a trade that had already yielded double-digit returns by the time it reported.

Consumer Staples (+7.3%) outperformed, driven by a strong rally in Woolworths (+16.4%). This followed an earnings result which showed improved momentum after a period of market share loss to rival supermarkets. This is a high quality, sector-leading business, and should continue to perform.

— Perennial Partners, Monthly Report, February 2026

A defensive rotation lifts the stock further

Clime Investment Management's March 2026 update reported the stock contributing as investors rotated into defensive consumer staples amid rising global uncertainty and recession fears, while Maple-Brown Abbott's own March update showed an overweight position up 25 per cent, combining resilient earnings and reasonable valuation with the company-specific momentum from the February result. Airlie Funds Management took a more skeptical stance the same month, avoiding the stock as it re-rated to all-time high multiples, arguing it was madness that CAR Group traded on a lower forward multiple than a business that had not meaningfully grown earnings.

A valuation debate emerges as the rally matures

Ten Cap reduced its position in April 2026, seeing softer consumer conditions and increasing competitive intensity likely to pressure margins going forward, and by June 2026 rated the stock an outright sell, noting it traded at around 27 times forward earnings against a long-run average of 22 times, up around 20 per cent year over year and back to COVID-boom levels, with weakening like-for-like sales trends. ClearBridge Investments took a middle path, moving to a hold after having found genuine value a year earlier amid negativity around the CEO transition, crediting new leadership for refocusing the business but seeing the valuation opportunity as largely closed.

We're a sell on Woolies today. The stock is up about 20% year-over-year, back to its levels from the COVID boom days. Valuation is a challenge, trading at about 27x forward earnings compared to a long-run of 22x. The concerns moving forward are weakness in like-for-like sales.

— Yarra Capital Management, Article, June 2026