End of an era coming for Woolworths’ Country Road

Woolworths’ struggling Australian division appears to have turned a corner, with the Country Road Group returning to full-year profitability on an adjusted EBIT basis.

However, rising interest rates and the war in the Middle East impeded any further recovery, with consumer sentiment, footfall, and spending coming under significant pressure.

Against this backdrop, all of Woolworths’ business units reported positive sales growth, though only one saw an increase in before-tax profit.

This was revealed in Woolworths’ results for the 52 weeks ended 28 June 2026, which were released on Wednesday, 2 September.

At a group level, Woolworths reported mixed results, with revenue up 4.02% to R83.47 billion, and turnover and concession sales up 4.35% to R84.51 billion.

However, the retailer’s profit dropped 5.05% to R2.33 billion for the period, while earnings per share dipped 3.80% to 263 cents.

Woolworths explained that, while it had a good start to the year, the second half of the 2026 financial year presented a more challenging operating environment.

The retailer pointed to the war in the Middle East as a pressure point that drove fuel prices and inflation higher, dampening consumer confidence and demand, and increasing operating costs. 

“This, coupled with the resumption of interest rate increases across South Africa and Australia, saw consumers increasingly prioritise promotional offerings and essential purchases,” the group said.

Despite this, Woolworths reported positive sales growth in all segments of its business, with its Food business leading the pack. However, most segments saw a decline in before-tax profit.

Woolworths’ Financial Services segment was the only unit to see positive profit growth, with its before-tax profit up 5.56% to R228 million.

Woolworths Food’s revenue was up 5.55% to R54.33 billion, though its before-tax profit dipped 1.13% to R3.23 billion.

Similarly, Woolworths Fashion, Beauty, and Home (FBH) saw revenue grow by 4.32% to R15.85 billion, but its before-tax profit nearly halved, dropping by 45.63% to R653 million.

Country Road Group

One segment to buck this trend was The Country Road Group, which saw revenue decline by 1.79% to R12.35 billion. However, its before-tax loss improved by 80.93% to R361 million.

Woolworths said the Country Road Group’s reset operating model resulted in expenses being marginally below last year.

This saw the Australian division return to full-year profitability, measured by adjusted EBIT, which reached AUD$2.3 million (R26.54 million).

Country Road Group returned to a positive adjusted EBIT margin of 0.3%.

While an improvement over the 2025 financial year, Woolworths said the segment did not recover to the extent initially envisaged before the onset of the war in the Middle East.

Woolworths’ Australian division has been struggling for years, as the retailer has struggled to contend with the highly competitive and heavily discounted retail market.

In 2020, the retailer was bleeding due to structural changes in the Australian retail sector and poor business performance at David Jones.

Woolworths had acquired David Jones, Australia’s oldest department store, in 2015, and the business had been facing severe difficulty.

Under former Woolworths CEO Roy Bagattini, Woolworths implemented a capital plan that helped drive a 90% reduction in the retailer’s net borrowings.

This also saw Woolworths’ return on capital employed increase from 9.2% to 14.9%.

In the 2021 financial year, Woolworths also saw positive growth in sales, revenue, and profit, aided by another standout performance from its Food business and a recovery in its FBH segment.

Despite intermittent lockdowns, the group also saw growth in Australia, with both David Jones and the Country Road Group reporting improved trade and profitability, thanks to higher full-priced sales and strict cost controls.

In 2023, Woolworths announced that it would dispose of its entire David Jones shareholding.

However, the Australian division continued to struggle and hit a low in 2024, when the Country Road Group reported a R533 million before-tax loss. 

This loss deepened in 2025 to a record low of R1.89 billion, prompting Woolworths to implement a reset programme.

This programme saw the group rationalise Country Road’s physical retail spaces and reduce its store locations in Australia to 529 locations.

This strategy appeared to have paid off in the 2026 financial year, with the Country Road Group’s before-tax loss narrowing and a return to profit on an adjusted EBIT basis.

The group’s gross profit margin also improved from 56.4% to 57.7%, while its Profit Before Tax-to-turnover improved significantly from -15.2% to -3%.

“Our immediate focus for Country Road Group is to continue its pathway to recovery,” Woolworths said in its results announcement.

“We are strengthening our approach to capital allocation, bringing greater prioritisation, strategic discipline, and capability to where and how we invest.”

“We have restructured our operating model and the composition of our executive committee, ensuring that our leadership is configured around execution and operational performance supporting our strategic intent.”

The retailer acknowledged that any reset takes time, but said it has clarity on its objectives and the drivers of future performance, “and the conviction to act decisively”.