Business

Woolworths feels the pain

Luke Fraser

 ·23 Jan 2024

Woolworths has flagged South Africa’s major domestic challenges, especially the tremendous congestion at Transnet’s ports.

The group’s turnover and concessions sales from continuing operations (excluding David Jones, which was sold in the prior year) for the 26 weeks ended 24 December 2023 grew by 5.4% and by 4.4% in constant currency terms.

The group said that its performance for the current period had been severely impacted by the difficult macroeconomic backdrop characterised by higher interest rate increases and higher living costs.

This has resulted in less discretionary spending in both South Africa and Australia.

Locally, business operations were impacted by higher levels of load shedding, congestion at Transnet’s ports, and the impact of the Avian flu on key food product liens.

Thus, group turnover and concession sales (which include the six-month contribution of David Jones in the prior period dropped by 23.6% on the prior period on a total basis.

South Africa

The group’s food business saw solid growth, with turnover concession sales growing by 8.4% and by 7.2% on a comparable store basis. Product inflation for the period averaged 9.1% – less than the headline food inflation figure.

The group’s retail space increased by 3.3% from the prior period, while online sales jumped by 46.6%, contributing 5.1% of South African sales, primarily through the increased use of Woolies Dash.

The Fashion Beauty and Home business was impacted by poor availability, primarily due to the late arrival of certain summer ranges arising from congestion at the ports. Turnover and concession sales grew by 2.2%, with comparable store sales increasing by 1.5%.

Woolworths Financial Services book saw a year-on-year increase of 4.9% to the end of December 2023 due to the growth in new accounts and credit card advances.

“The annualised impairment rate for the six months ended 31 December 2023 was 6.3% – an increase from the 5.5% in the prior period.

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

Country Road

Trading conditions in Australia and New Zealand have worsened, with consumer sentiment at record lows and household savings at their weakest since the global financial crisis.

The retail industry has also been impacted by the shift in spending towards services instead of goods.

Hence, Country Road Group sales dropped by 5.0% and 9.5% in comparable stores. This came off a high prior period base in which sales grew by 25.5% following the strong recovery from the Covid-19 lockdowns.

Results

Due to the inclusion of David Jones in the prior period, the group stressed that its results in the 2024 financial year are not directly comparable.

Thus, the Earnings per share (‘EPS’), headline EPS (‘HEPS’) and adjusted diluted HEPS (‘adHEPS’) for the current period are expected to be more than 20% lower than the previous period.

Read: 24 jobs in South Africa that pay over R2 million in 2024