Woolworths on looting impact and financial results

Clothing and grocery retailer Woolworths says the recent civil unrest in KwaZulu-Natal (KZN) and parts of Gauteng, which escalated into widespread looting and destruction of property in those areas, has had a significant impact on its operations.

All stores in KZN, as well as several stores in Gauteng, were forced to close temporarily last week, while the group’s online delivery services and certain suppliers in those areas were also significantly affected with major damage to their assets, it said.

Eleven Woolworths stores were looted and severely damaged – nine in KZN and two in Gauteng.

“Although looters gained entry to the Woolworths Maxmead Distribution Centre (DC) in KZN the infrastructure was not severely damaged and has been secured, together with our other DCs. Operations have resumed and we have prioritized the provision of food into KZN.

“Where we believe it is safe and feasible to do so, we have begun reopening stores in most areas of KZN,” it said.

Woolworths joins a host of listed retailers that have started to count the cost of the damage caused by the unrest in the two provinces. They include Pick n Pay, Shoprite, Spar (184 stores), and Massmart, including Game and Makro (42 stores).

Clothing retailer Mr Price Group reported damage at 109 stores, along with Pepkor (489 stores), and Foschini Group (190 stores). Famous Brands, which includes Mugg & Bean, Wimpy and Steers reported 99 store closures as a result of damage, while Cashbuild said 36 stores were damaged and looted.

Woolworths said it has SA Special Risk Insurance Assurance (SASRIA) cover in place in respect of material damage caused by the rioting, together with the related business interruption cover.

The upmarket retailer on Monday published a trading update for the 52 weeks ended 27 June 2021.

Group sales for the period increased by 9.7% compared to a year earlier, and by 5.9% in constant currency terms. Trading conditions in the second half of the financial year are not directly comparable to the prior year, given the extensive impact of the pandemic, it pointed out.

South Africa’s recovery during this phase of the Covid-19 pandemic has been set back by the onset of the third wave of infections occurring towards the end of the fourth quarter, the group warned.

“The consequential level 4 restrictions have further dampened already-weak consumer confidence, which is expected to limit discretionary spend,” Woolworths said.

“Furthermore, the civil unrest and related widespread destruction of property will also negatively impact economic conditions, consumer sentiment and constrain our ability to trade in impacted areas.

“The rebuild and repair of affected stores is likely to take some time, following the assessment of the damage, and trading will be dependent on the resumption of supply, logistics, and operational activities at these stores.”

Woolies Food

The Woolworths Food business grew both market share and volumes during the period despite the high base set in the prior year driven by stockpiling ahead of the first lockdown.

Sales for the current year grew by 6.9%, and by 5.7% in comparable stores, on a price movement of 5.2% and underlying product inflation of 4.9%.

“Sales in the second half of the current year grew by 3.2%, and by 16.9% over a two-year period, reflective of the investment in innovation and our robust business model,” the group said.

Woolworths said that while there has been some reversion in customer shopping behaviour, frozen foods and groceries continue to deliver strong growth.

“Due to the continued Covid-related trading restrictions, trade in cafes, and wine and beverages remains negatively impacted. We continue to invest in price in key product categories to improve our value proposition while remaining focused on product quality, innovation and convenience,” it said.

Online sales grew by 117.9% over the current year, contributing 2.3% to our South African Food sales. This was further supported by the expanded Click-and-Collect offering and the rollout of its on-demand delivery service, Woolies Dash.

The group said that the sales performance of the Woolworths Fashion, Beauty and Home business continues to be impacted by several factors, including the constrained environment, the decline in demand for formalwear, and initiatives to streamline its private-label offerings and rationalise unproductive space.

Total revenue for the current year increased by 3.5% and by 4.2% in comparable stores, while sales in the second half of the current year grew by 24.1% on last year’s non-comparable base.

Online sales grew by 114.4%, contributing 4.1% to South African sales, it said.

Read: Same day delivery in South Africa: Woolies Dash vs Bottles by PnP vs Checkers Sixty60

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Woolworths on looting impact and financial results