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Retail group Woolworths says that its new pricing strategy has been well-received by customers, helping to boost sales in the last six weeks of 2020, as South Africa continued to feel the impact of the Covid-19 crisis.<\/p>\n
In a trading statement on Monday (25 January), the group reported increased sales for the 26 weeks ended 27 December 2020, up 5.3% compared to the corresponding period in 2019.<\/p>\n
This was driven largely in the Woolworths Food segment in the final weeks of the year, which saw sales increase 12.0%, and deliver further market share gains.<\/p>\n
Food sales over the 26-week period grew by 10.9% and by 9.4% in comparable stores, with net space growth of 0.4%.<\/p>\n
Woolworths said that its price investment strategy – where it committed to investing R1 billion into the business to keep prices of select items stable, remains a priority for the business.<\/p>\n
Price movement was 7.1%, impacted by mix, while underlying product inflation averaged 4.8% over the period.<\/p>\n
It also noted the success of its digital strategy, which saw online food sales grow by 158.5%, contributing 2.2% to sales, overall. This segment was boosted by the expansion of the click and collect offering, and successful trial of an on-demand delivery service, it said.<\/p>\n
The same successes were not felt in other segments, however.<\/p>\n
Woolworths Fashion, Beauty and Home continued to take strain, seeing sales decline 11.2% over the period, with comparable store sales 11.0% lower on a 2.4% price movement.<\/p>\n
While online sales more than doubled, this was not enough to counteract the effects of reduced foot traffic, a drop in Black Friday participation and lower need for formal wear.<\/p>\n
The Woolworths Financial Services segment reflected year-on-year contraction of 2.2%. The annualised impairment rate for the six months ended December 2020 was 4.1%, compared to 3.3% for the prior period.<\/p>\n
“Trading conditions across the group continued to be impacted by Covid-19, with significantly reduced store footfall, particularly in larger shopping centres and CBD locations,” Woolworths said.<\/p>\n
“Considered actions to stimulate trade, strengthen online capabilities, manage inventory levels and execute property sales, have resulted in positive cash flows and a continued reduction in net debt levels in both South Africa and Australia.”<\/p>\n
The group advised that its earnings per share and headline earnings per share would be significantly higher for the year – although this is largely due to property sales and renegotiated leases in Australia.<\/p>\n
Taking these into account, earnings are anticipated to be between 70% and 80% higher than in the previous period. Excluding profits from the property sale, headline earnings are expected to be between 50% and 60% higher.<\/p>\n
Excluding both the property sale profits and lease negotiations, diluted headline earnings are expected to be between 17% and 22% higher, it said.<\/p>\n
Shares in the group advanced in early trade on Monday. Woolworths is expected to publish its results for the 26 week period on 25 February 2021.<\/p>\n
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