Woolworths reported 1Q26 sales growth of 2.7% overall and 1.6% comparable sales growth in its Australian Food segment. The weak sales trend has led Woolworths to increase its promotions, inventory and staffing investment to help stabilise its market share. Sales trends are likely to improve but it will dent profit margins. We forecast Australian Food EBIT growth of 5% for FY26e at the low end of the company’s guidance range. Woolworths’ valuation is appealing but its sales and margin recovery will be gradual and is not without risk.