Business

Woolworths under pressure

Luke Fraser

 ·4 Mar 2026

Woolworths says its gross profit margins and basic earnings have taken a hit despite progress in various strategic initiatives.

In its results for the first half of 2026, the group saw improved performance in its apparel businesses and continued above-market growth in its food business.

This comes despite a constrained trading environment across both South Africa and Australia.

It said that discretionary spend remains subdued in Southern Africa despite easing inflation and the lower interest rate environment.

It added that Australia’s prolonged discounting in a high-cost inflationary environment is also exerting pressure on retail footfall and spend.

The group was thus pleased with turnover and concession sales growth for the period of 5.4%
and 6.1% on a constant-currency basis, with positive sales growth across all segments of the business.

However, the group said that gross profit margins have been under pressure due to a series of initiatives.

This includes “long-term capacity investment, targeted price investment, the stronger growth of lower margin channels and categories and increased promotions to clear excess inventory.”

The group said that the expansion of the Midrand distribution centre is well progressed, despite impacting the near-term gross profit margin due to increased depreciation from the investment.

While the gross profit margin is under pressure, the group said expenses have been well controlled, ensuring overall gross profit growth for the period.

Headline earnings per share were up by a pleasing 9.6% to 167.4 cents per share.

Earnings per share growth was negatively impacted by the inclusion of the profit on the sale of the Bourke Street property and the prior-period rental income from the property.

Earnings per share fell 32.1% compared to the prior period to 166.6cps per share for the period.

Despite a drop in basic earnings, the group still increased its interim dividend per share to 118 cents over the period.

The group’s previously communicated share buyback programme commenced in September 2025, with 6.9 million shares repurchased at a weighted-average share price of R51.23.

Individual businesses

Woolworths South Africa saw above-market turnover and concession sales growth of 6.8% for the period, despite weak consumer confidence and spending.

The group’s Food business saw turnover and concession sales growth of 7.0% and 5.2%, supported by underlying volume growth and investment in its premium food offerings.

The group said that revenue from Woolies Dash grew by 23.0%, with the online channel now contributing 7.2% to SA Food sales. Net trading space increased by 4.3% (weighted basis: 1.8%) on the prior period.

Woolworths Food saw its adjusted operating profit grow by 3.5% to R1,780 million, delivering an operating profit margin of 6.5%.

Woolworths Fashion, Beauty and Home (FBH) turnover and concession sales increased by 6.2% and 6.4% on a comparable-store basis, supported by improved product availability.

The Beauty and Home businesses delivered stronger growth of 8.9% and 14.0%, respectively. However, net trading space is decreasing by a further 1.9% as part of a plan to optimise space.

FBH operating profit increased by 1.0% to R771 million, implying an operating profit margin of 9.3% for the period.

The Woolworths Financial Services book increased by 1.8% on a year-on-year basis to the end of December 2025, and by 2.6% excluding the sale of part of the legal book.

This was driven by a large, disciplined focus on quality growth in both new accounts and new credit limit increases on existing accounts.

The annualised impairment rate for the six months ended 31 December 2025 was 6.4%.

In Australia, the Country Road Group (CRG) saw sales increase by 2.3% for the period and by 2.5% on a comparable-store basis.

“The Country Road, Witchery and Politix brands traded ahead of the prior period, benefiting from the repositioning of the brand portfolio and the successful restructuring of CRG’s operating model,” said the group.

That said, higher promotional activity and deliberate initiatives to clear excess inventory resulted in a 100bps decrease in the gross profit margin to 57.9%.

CRG’s adjusted operating profit of A$14.8 million increased by 4.2%, returning an operating profit margin of 2.6%.

Looking ahead, the group said that the South African macroeconomic environment is showing early signs of recovery.

However, inflationary pressures in Australia and a recent interest rate hike will likely hurt consumer confidence, tempering a recovery in Australian retail spend.

“Further, recent geopolitical events will increase the degree of uncertainty around the broader global macro outlook,” it said.

“Notwithstanding this context, we have clear and compelling strategies and strengthened foundational capabilities, which are already yielding positive outcomes.”