Woolworths used "net profit after tax” (NPAT) and growth of NPAT (NPAT Growth) as key measures of its performance. On 29 August 2014, Woolworths made statements to shareholders and the market that Woolworths' FY2014 NPAT Growth demonstrated that it was delivering strong and sustainable NPAT Growth in established parts of the business and that it expected that FY2015 would be another year of growth with NPAT expected to increase by 4% to 7%. Woolworths repeated or did not qualify these statements on three later occasions: in September 2014 with the release of the company’s 2014 Annual Report and again on 3 and 27 November 2014 with the release of the company’s first quarter sales results and at the company's AGM respectively.
Then, on 27 February 2015, with the release of its FY2015 half year results, Woolworths downgraded its FY15 NPAT guidance to "the lower end of the current analyst NPAT growth forecast range for FY15 of 1.8 – 6.6%" and said that it would be making investments into its Australian Supermarkets business which would impact its second half FY2015 results. Following the announcement on 27 February 2015, there was a substantial increase in trading in Woolworths shares, and the share price plunged by almost 10%. On the next day of trading, 2 March 2015, the price of Woolworths shares continued to fall, with an overall decline of almost 14% over the two trading days from 27 February to 2 March 2015.
Woolworths deferred clarification of its decision to downgrade NPAT guidance and its strategy to improve its performance until its Investor Strategy Day on 6 May 2015, at which time it revealed that:
- prior to February 2015,
- it had lost focus on its customers;
- its prices in FY15 had been rising by more than its competition;
- the number of items being purchased by customers in its stores was declining by more than its competition;
- the number of times customers were shopping in its stores was significantly below its competitors; and
- a significant amount of labour had been taken out of stores;
- it needed to:
- restore sales momentum;
- invest money to neutralise its competition on pricing;
- put more labour hours back into stores;
- dramatically improve on-shelf availability for customers;
- rapidly address matters affecting customers' in-store experience; and
- rebalance the number of new store openings with refurbishments to existing stores, which had been deliberately cut back;
- it would take time to build customer trust and regain sales momentum; and
- it was on a 3 year journey.
At the same time, Woolworths also released disappointing 3Q15 sales results, which were indicative of the extent of the problem and the fact that, notwithstanding investments being made, it would take time for Woolworths to improve its customer retail offer and competitive position.
The price of Woolworths shares dropped 5% on 6 May 2015 and continued to fall on the next day of trading, resulting in an overall decline of 7% between 6 and 7 May 2015.