Chief executive Brad Banducci told Today that a declining demand in sales of the merchandise was behind the move.
He conceded the decision was not communicated well to the public, saying “we could have done a better job explaining it”.
“It is a commercial decision,” Banducci said.
“There are many other places you can buy Australia Day-specific merchandise. We focused on what we do best.”
Woolworths isn’t the only retailer that has dropped the merchandise, joining Big W and Aldi.
Coles announced it would be stocking a “small range” of Australia Day-themed products.
“We are stocking a small range of Australian-themed summer entertaining merchandise throughout January which is popular with our customers for sporting events such as the cricket and tennis, as well as for the Australia Day weekend,” a spokesperson said.
However the Woolworths chief executive maintained the supermarket had not joined a campaign to cancel the holiday.
“We are celebrating Australia and what it means to be Australian, with the way we can celebrate it best – which is with food,” Banducci said.
“We could have done a better job of explaining the decision. Clearly that’s true.
“I feel the weight on myself and the impact that this is having on our team.
“They are proud, hard-working Australians, and for them to be seen as – anti-Australian or woke, is fundamentally unfair.”