Woolworths expects huge boost in earnings

 ·19 Jan 2023

Retail giant Woolworths South Africa expects its profit growth to increase dramatically to 80% by December 2022.

In a trading update for the 26 weeks ending 25 December 2022, the group anticipates headline earnings to settle between 285.4 cents to 302.2 cents  a share, driven higher by a significant improvement in sales over the festive and Black Friday seasons.

The positive performance was seen across the board in the company’s food, fashion and financial services sector, it said.

According to Woolworths, the Fashion Beauty Home (FBH) turnaround strategy has continued to gain traction, with sales growing between 11.2% and 12.0% in the last six weeks of the recorded period.

Woolworth’s food division had significant turnover and concession sales, with a growth of 7.6%. Sales growth accelerated to 8.6% in the last six weeks of the period.

“This is notwithstanding the considerable disruption caused by load shedding, which continues to have a pronounced impact on our predominantly fresh business in terms of foregone sales and increased waste,” it said.

“Additionally, we continue to incur a significant increase in diesel costs to enable trade during extended power outages.”

Woolworths said that its financial services book reflects an increase of 17.2% to the end of December 2022 compared to the previous year. This was driven primarily by improved consumer spend, as well as new business and credit card advances.

Shift online

Woolworths has made strides in making purchasing goods more efficient through online transactions, including its same-day delivery service, Woolies Dash, which continues to deliver its goods across South Africa.

Online sales in the food space saw growth by 4.5% and an overall contribution of 4.2% of all sales across the country. Online sales for the FBH sector saw massive growth at 22.7%, contributing to 3.6% of all sales in the division.

In August last year, the company stated that it is shifting its focus to digital, data, and online, with plans to enhance its data analytics capabilities and promote data-driven decision-making across the organisation. Woolworths aims to utilise existing data to guide decisions and processes more effectively.

“As demand for online shopping continues to grow, we have continued to focus our investments on optimising the online shopping experience and order fulfilment across all our delivery networks,” said Woolworths in early December 2022.

According to Liz Hillock, the director of Online and Mobile at Woolworths, over 70% of online food sales now come from the Woolworths App, which includes the Woolies Dash delivery feature.

The Woolworths App has recently been updated to include the WRewards, online promotions and vouchers, and also brings together the categories of Food, Fashion, Beauty and Home on one platform. On top of that, Woolworths has also improved its next-day delivery for Fashion, Beauty, and Home products.

Sale of David Jones

Woolworths Holdings had also seen significant change with the sale of its entire shareholding in the Australian subsidiary, David Jones.

The group expects the transaction to be completed by the end of March 2023, with the final proceeds of its sale to be determined based on completion accounts, said Woolworths.

Read: Woolworths launches click-and-collect for online shopping – how it works

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