Woolworths winning in South Africa – but there’s trouble

Retail group Woolworths has published a trading update for the 18 weeks ended 3 November 2024, praising its Food and other operations in South Africa while warning about worse-than-expected conditions in Australia.

The group noted that its Food business continued to show strong turnover and concession sales growth of 12.1%, and 7.3% on a comparable-store basis.

This, it said, showed that the Woolies brand remained strong among consumers.

Excluding Absolute Pets, which was acquired in the fourth quarter of the previous financial year, Food sales increased by 9.6%. Price inflation for the period averaged 6.2%, with trading space, excluding Absolute Pets, increasing by 2.0% on the prior period.

The group is also seeing strong online sales growth, jumping 36.9%, contributing 6.2% of Food sales.

This was driven the group’s on-demand service, Woolies Dash, which delivered sales growth of 54.4% for the period, it said.

Even beyond food, the other aspects of the business were showing growth and positive trends.

Fashion, Beauty and Home momentum accelerated, with turnover and concession sales increasing by 3.5% and by 2.8% on a comparable-store basis.

The Woolworths Financial Services book at the end of October 2024 was 3.5% below last year, year-on year, and up 2.1% excluding legal book debt sales.

The annualised impairment rate for the four months ended 31 October 2024 was 5.9%, compared to 7.5% in the prior period, it said.

However, there are some troubled spots, particularly from the Country Road Group (CRG), which is focused on Australia and New Zealand.

Trading conditions in these countries continued to prove “more challenging than anticipated”, Woolworths said, with the retail sector facing further declines in footfall, intense promotional activity, and the shift of spend towards value brands.

“Within this context, CRG sales declined by 8.8% for the period and by 13.8% on a comparable-store basis.

“Notwithstanding the challenging macroeconomic backdrop, the Country Road brand remains resilient, and Trenery is delivering strong topline growth, following the repositioning and rebranding of its offering.

We remain focused on improving the positioning and performance of the other brands, particularly Witchery, which are at different stages of their respective repositioning,” Woolworths said.

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