Woolworths reports massive increase in online food sales, but flags rising prices
Retailer Woolworths said Wednesday (20 February) that group online sales for the 26 weeks ended 26 December 2021 grew by 22.4%, contributing 13.7% to total turnover.
Group turnover, however, decreased by 1%, and by 0.3% in constant currency terms, to R39.2 billion, with the group citing the impact of lost sales arising from the prolonged lockdowns in Australia.
While headline earnings per share declined sharply, Woolworths declared a dividend of 80.5 cents per share.
Financial overview:
- Turnover: -1.0% to R39.2 billion
- Turnover and concession sales: -2.1% to R42.1 billion
- Profit before tax: -36.9% to R2.3 billion
- Adjusted profit before tax: -16.9% to R2.2 billion
- Headline earnings per share: -35.6% to 168.2cps
- Adjusted diluted headline earnings per share: -16.3% to 162.2cps
- Interim dividend of 80.5cps (2020: Nil)
In South Africa, Woolworths said that trading conditions earlier in the reporting period were impacted by the ongoing effects of Covid-19, the civil unrest in July, power outages, international supply chain disruptions, and supplier delays.
“International travel restrictions during the key festive season affected inbound tourism and consumption to some degree,” it said.
Woolworths Fashion, Beauty and Home (‘FBH’)
The FBH business grew turnover and concession sales by 4.2% and by 4.7% in comparable stores, with a price movement of 5.4%. Growth on the prior period was impacted by the reduced footprint, among other things.
Online sales, however, grew by 19.2%, contributing 4.4% of South African sales, while the ongoing execution of space reduction initiatives reduced the footprint by 6.1%, resulting in improved trading densities, it said.
Woolworths Food
The Woolworths Food business grew turnover and concession sales by 3.8% for the half and by 5.8% in the last six weeks of the period.
Sales in comparable stores grew by 2.8%, with price movement of 2.6% and underlying product inflation of 3.7%. Sales growth, it said, should be considered in the context of the high Covid-19 base, which benefitted from increased home consumption.
Relative to the comparative 2019 period, sales have grown by a cumulative 15.2%. Online sales increased by 55.8%, contributing 3.1% of South African sales, while space grew by 2.2% relative to the prior period, Woolworths said.
It said that expenses grew by 6.3%, due to the ongoing investment in online and digital capabilities and higher energy costs. Adjusted operating profit declined by 8.0% to R1 409 million, returning an operating margin of 7.2% for the period.
Looking ahead, the retailer said that the South African economy is showing encouraging signs of a post-pandemic recovery. “Notwithstanding this, high unemployment, coupled with rising inflation and rising interest rates, is likely to remain a headwind to the outlook for consumer spend,” said WHL Group CEO, Roy Bagattini.
In Australia, he said that trading conditions are expected to improve post the Omicron peak at the beginning of the second half, as restrictions ease and consumer confidence recovers. Footfall in stores is also expected to improve, albeit that it is likely to remain below pre-Covid levels, particularly in CBD areas.
“Whilst the prospect of rising interest rates will have some impact, the underlying fundamentals of the economy are sound with record low unemployment, rising wages and a robust housing market.
Bagattini said that global supply chain disruptions and high freight costs continue to pose a risk to both the cost and supply of product.
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