Retailer Woolworths said Thursday (19 November), that trading conditions across the group continues to be impacted by Covid-19, with store footfall, particularly in large shopping centres, CBD and airport locations, at significantly lower levels than the prior period.
In South Africa, Covid-19 restrictions were eased to level 2 from 17 August and to level 1 from 21 September, which effectively removed most remaining restrictions on trade. “However, whilst the National State of Disaster remains in place, economic recovery is slow and consumer confidence remains low,” the group said.
As a result, sales for the first 20 weeks of the 2021 financial year increased by only 3.5% compared to the 20 weeks ended 17 November 2019, and declined by 2.0% in constant currency terms.
Recovery in Australia has been hampered by the imposition of the stage 4 lockdown in the State of Victoria from 6 August to 28 October, resulting in unplanned store closures.
“Inventory levels remain well managed, assisted by the ongoing shift to online across all businesses, however the pandemic continues to disrupt supply chains both locally and globally, which we are monitoring and managing carefully.
“Group cash flow remains positive and net debt levels have continued to decline in both South Africa and Australia. Additionally, the various initiatives underway to ensure a more sustainable funding structure of our Australian entities are progressing well,” Woolworths said.
In South Africa, Woolworths Food remained resilient throughout the reporting period, continuing its positive momentum with volume growth and market share gains despite trade restrictions and disruptions from temporary Covid-19 related store closures.
Sales grew by 10.6% and by 9.0% in comparable stores, with net space growth of 1.4%. Price movement of 7.1% was impacted by mix, with reduced demand for lunchtime and snacking products and customers opting for larger pack sizes, the group said.
Underlying product inflation averaged 4.7% over the period, Woolworths said.
The retailer said that price movement will be ‘tempered’ going forward, through a planned price investment plan, which will see the retailer invest R1 billion in its prices over the next two to three years in a bid to make its products ‘more accessible to more customers’.
This will include a R750 million investment into pricing for its foods business, and R250 million in its fashion business. The first phase of this journey begins with a R250m price investment planned in the Foods business and R250m in the Fashion business for this financial year.
The investment is being focussed on the most popular Woolworths products.
In Foods, this includes the entire fresh chicken range such as all whole and portion chicken packs, excluding Easy to Cook, crumbed and marinated chicken. “While this investment will initially be most visible in our poultry products, we have also applied more promotions on everyday basics across groceries, household and personal care to be more affordable to more customers,” the company said in October.
In fashion, the investment will be in selected key wardrobe essentials.
Woolworths said that its Fashion, Beauty and Home segment continued to be affected by the constrained environment.
The winter clearance sale was much smaller than the prior period and, together with a significant drop in demand for formal wear, negatively impacted sales growth for the period, which declined by 14.6%.
Comparable store sales were also 14.6% lower on a 1.9% price movement, while net space reduced by 0.5%.
“The launch of summer ranges, together with the earlier commencement of our Black Friday promotions, has resulted in positive sales growth in the last three weeks of the period,” Woolworths said.