Consumers in South Africa are under pressure – but still making their way to Woolies

 ·15 Nov 2023

Despite a challenging trading environment, Woolworths has seen sales growth for the 20 weeks ending 12 November 2023.

The group’s turnover and concession sales from continuing operations (i.e. excluding David Jones, which was disposed of in the prior period) grew by 4.7% and 3.9% in constant currency terms.

“This is notwithstanding an increasingly challenging macro-economic backdrop, given the sustained effect of interest rate increases and higher living costs, which are negatively impacting footfall and discretionary spend in both geographies,” the group said.

“In South Africa, our business operations were further disrupted by a number of external factors, including the Western Cape taxi strike, congestion at the ports, and the impact of Avian flu on the availability of key product lines.”

When including the contribution of David Jones in the prior period, group turnover and concession sales on a total basis dropped by 22.4%.

Despite the difficult macro environment, the group said that it remains focused on profitability trading its businesses, which should be supported by robust trade plans going into the festive season.

Local operations

“The economic environment in South Africa remains weak, exacerbated by the country’s energy crisis, which continues to have a pronounced impact on both business and consumer confidence,” the group said.

“However, our unwavering commitment to quality, the ongoing investment into our value proposition, and our intensified focus on execution has further strengthened the trust customers place in our brand.”

The group’s food business showed underlying growth, with turnover and concessions sales up 8.4% and 7.2% on a comparable basis.

This is in spite of the Avian flu outbreak, which has reduced the availability of eggs and poultry.

Online sales increased by 46.2% – 5% of total South African sales – mainly due to increased use of Woolies Dash.

“Whilst the Fashion, Beauty and Home business continues to make steady progress against its strategic priorities, sales performance in the latter part of the 20-week period was impacted by the late arrival of certain summer ranges, arising from congestion at the ports,” the group said.

Turnover and concession sales in this business grew by 1.4%, with comparable store sales in line with last year.

Although net trading space declined by 0.2% from the prior period, online sales grew by 23.0% and contributed 5.2% of South African sales.

The Woolworths Financial Services Book also showed a year-on-year increase of 10.7% at the end of October, primarily due to new accounts and credit card advances.

“The annualised impairment rate for the four months ended 31 October 2023 was 7.5%, compared to 6.2% in the prior period,” the group said.

“While this reflects the strain that consumers are under in the current macro-economic environment, it is reducing from the peak of the last quarter of the previous financial year.”

Country Road Group

South Africa is not alone in its difficult trading conditions, with the challenging situation in Australia and New Zealand resulting in a decline in the group’s retail sales.

Country Road Group sales dropped by 8.1% and by 10.7% in comparable stores, but this comes off a particularly high base where sales increased by 36.2% following the end of the Covid-19 lockdowns.

“We are making good progress in the expansion of our wholesale and concession offering in support
of our growth agenda. Trading space increased by 4.3% during the period, while online sales contributed 26.0% to total sales, broadly in line with the 25.8% contribution in the prior period.”

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