New Woolworths CEO has the same old problems

Since taking the helm in June 2026, Woolworths CEO Sam Ngumeni has had to contend with a stronger South African segment and a lagging Australian division.

Aside from a better-performing Fashion, Beauty, and Home (FBH) division, this is the same situation Ngumeni’s predecessor, Roy Bagattini, found himself in.

However, this time around, Ngumeni is contending with the impact of the war in the Middle East on consumer confidence and spending.

Positively, Woolworths does expect its Australian division to return to full-year profitability in the 2026 financial year, despite slowing sales momentum in the second half of the year.

This can be seen in Woolworths’ trading update released on Thursday, 30 July, which detailed the retailer’s performance in the 2026 financial year.

While the first half of the 2026 financial year was off to a strong start, the second half disappointed as the retailer contended with higher fuel prices and inflation.

These pressures, stemming from the war in the Middle East, dampened consumer confidence and demand while increasing operating costs.

In the trading update, Woolworths said consumers increasingly prioritised promotional offerings and essential purchases over the past six months.

This was the case for consumers in South Africa and Australia, slowing Woolworths’ sales growth in the second half of the 2026 financial year.

In its trading update, which covers the 52 weeks ended 28 June 2026, Woolworths said its turnover and concession sales grew by 4.3%, and by 4.8% in constant currency.

The retailer saw positive sales growth in all segments of its business on a full-year basis. However, second-half growth slowed to 3.3%.

This will impact Woolworths’ full-year earnings, with the retailer expecting the following changes compared to its 2025 financial year:

• Earnings per share: down between 0% and 10%
• Headline earnings per share: up between 2.5% and 7.5%
• Adjusted headline earnings per share: up between 1% and 6%

Woolworths’ earnings were impacted by some base effects, including the sale of its Bourke Street property, one-off restructuring initiatives, and some unrealised forex losses in 2025.

From a segmental perspective, Woolworths saw stronger growth in South Africa than in Australia, aided by an improving local FBH division.

South Africa versus Australia

Woolworths South Africa delivered solid turnover and concession sales growth of 5.4%, despite trading momentum having moderated to 4.1% in the second half of the year.

Woolworths said the impact of softer consumer demand and disruptions to trade was more pronounced in its FBH division.

The Food Division, as usual, delivered above-market turnover and concession sales growth of 5.7%, or 3.7% on a comparable store basis.

Revenue through the Woolies Dash on-demand service grew by 19.6%, with the online channel contributing 7.3% to South African Food sales.

The division faced higher distribution costs from inflated fuel prices and investment in Woolworths’ Midrand distribution centre.

Despite this, its gross profit margin was maintained at the same level as in 2025, driven by operational efficiencies.

The FBH Division saw turnover and concession sales grow by 4.4%, or 4% on a comparable store basis.

This was driven by a very strong first half, as the division’s sales growth slowed significantly in the second half of 2026 to 2.6%.

However, the retailer said its price investment in the Kidswear segment, additional promotional activity, and clearance of excess inventory put pressure on FBH’s gross profit margin.

“Notwithstanding further cost reduction efforts, these were insufficient to offset the impact of gross profit margin dilution on H2 profit,” it said.

In Australia and New Zealand, where Woolworths trades as the Country Road Group (CRG), the retailer saw a strong start to the 2026 financial year.

These operations, which have been bleeding money for years, started to stabilise in the first half of the financial year.

However, the second half of the year saw interest rate hikes and the Middle East war, which “impeded any further recovery”.

Woolworths said consumer sentiment, footfall and spending came under pressure in the second half of the year. “The sector remains intensely promotional as retailers reduce excess inventory levels,” it said.

For the year as a whole, CRG’s sales increased by 1%, and by 1.6% on a comparable store basis. Its sales growth slowed to 0.5% in the second half.

“Our deliberate focus to improve the quality of sales with greater full price sales and reduced discounting resulted in a higher H2 gross profit margin year-on-year,” the retailer said. 

“This, coupled with the reduced cost of doing business as a result of our reset operating model, saw CRG pleasingly return to full-year profitability.” 

While this is a significant milestone for the struggling business, Woolworths noted that CRG’s return to profit will not be as large as initially envisaged.