Woolworths food unit hungry for growth

Woolworths plans to expand its South African food unit after the sale of Australia’s oldest department store chain, David Jones, removed about R18 billion in liabilities.

The Cape Town-based retailer is opening more outlets that sell ready-to-eat items and more cafés, CEO Roy Bagattini said in an interview on Wednesday.

It’s also looking at other quick-service food options and will dedicate more space to its liquor business, he said. 

The David Jones disposal has allowed management to spend more time on the core South African fashion and food businesses. Woolworths earlier beat analysts’ estimates with a full-year dividend of R3.13 a share, an increase of 36% from a year earlier. Food sales, which contribute about half of revenue, climbed 6.3%. 

Margins at its local clothing unit also improved as Woolworths sourced more items locally and cut the number of lines offered.

Bagattini expects to simplify the offering further in its bigger stores as well as open smaller local outlets that focus on clothes curated for that specific neighbourhood.

The proceeds from David Jones have also been used to recently complete Woolworths’ biggest share buyback of almost 7% of its shares, and more purchases “remain an option,” he said.

“We’ve seen the benefit of that,” he said. “Some of it has played through into these results, but frankly, from a timing perspective, a lot of the buyback happened toward the back end of our financial year, so we should see some of that flow through into this current financial year as well.”