Woolworths is seriously hamstrung by its apparel businesses in South Africa, Australia and New Zealand. <\/p>\n\n\n\n
The group recently published a trading update for the 26 weeks ended 29 December 2024, which showed that the group’s turnover and concession sales increased by 5.7% and 6.2%, respectively.<\/p>\n\n\n\n
Despite the strong performance of the group’s food business, the weaker-than-expected performance of its apparel businesses in South Africa and Australia will impact headline earnings, which are expected to drop 22% and 27%, respectively.<\/p>\n\n\n\n
Speaking with BusinessTech, Chantal Marx, Head of Investment Research at FNB Wealth and Investments, said that Woolworths’ financial guidance was disappointing.<\/p>\n\n\n\n
Marx added that the bottom-line guidance was tracking well behind full-year expectations.<\/p>\n\n\n\n
The top-line growth was better than expected, with the group benefitting from sales growth in its Food business. <\/p>\n\n\n\n
However, lower contributions from the apparel businesses in South Africa, Australia and New Zealand were disappointing. <\/p>\n\n\n\n
“Looking ahead, consumer sentiment in South Africa is improving, supported by moderating inflation, interest rates easing, and the prolonged suspension of load shedding,” said Marx. <\/p>\n\n\n\n
Offshore, improved consumer sentiment in Australia and the uplift in retail sector sales buoyed by Black Friday were key highlights. <\/p>\n\n\n\n
Nevertheless, the sustained effect of high interest rates and elevated living costs continues to weigh on consumer behaviour and discretionary spending.<\/p>\n\n\n\n
The numbers from the trading update support Marx’s insights. <\/p>\n\n\n\n
Woolworths South Africa delivered turnover and concession sales growth of 9.1% for the 26 weeks ended 29 December 2024. <\/p>\n\n\n\n
The Food business saw turnover and concession sales growth of 11.4% and 7.3% on a comparable-store basis. Excluding the recently acquired Absolute Pets, food sales jumped by 9.0%. <\/p>\n\n\n\n
Online sales increased by 37.2%, with Woolies DASH, which saw sales growth of 49.2%, driving the overall increase. <\/p>\n\n\n\n
Fashion, Beauty and Home (FBH )turnover and concession sales increased by 2.5% and by 2.7% on a comparable-store basis over the period. <\/p>\n\n\n\n
That said, sales growth in the last eight weeks was constrained to 0.9% due to temporary delays in products amidst later supplier deliveries and systems changes at its distribution centre.<\/p>\n\n\n\n
The Beauty business was a bright spark, delivering growth of 17.3% over the period, with the group planning to further expand the business. <\/p>\n\n\n\n
Amidst a restructuring, the Australian-based Country Road Group saw sales decline by 6.2% over the period and by 7.8% on a comparable-store basis.<\/p>\n\n\n\n