Woolworths Group's (ASX:WOW) market share outperformance is expected continue in fiscal fourth quarter, underpinned by price investment and improved in-store execution, RBC Capital Markets said in a Monday note.

RBC forecasts the Australian food segment to deliver 4.4% comparable sales in the quarter, ahead of Woolworths' rival Coles Group (ASX:COL) at 3.4%, and AU$2.91 billion in earnings before interest and taxes (EBIT), compared with the consensus estimate of AU$2.92 billion. Fiscal 2026 and fiscal 2027 net profit after tax estimates were increased by 20 basis points.

Woolworths' shift to the "everyday low prices" strategy has the potential to underpin market share gains into fiscal 2027 as price trust is re-established, RBC said. The announced shelf price freeze on 300 Woolworths-branded staples signals continued gross margin pressure in the Australian food segment. Fuel headwinds of AU$15 million to AU$25 million to the segment's EBIT in fiscal 2026 are an additional drag.

The investment firm downgraded Woolworths to underperform from sector perform while raising the price target to AU$35 from AU$33.50.

Woolworths' shares shed nearly 2% in recent Tuesday trade.