Woolworths plans to expand its clothing chain through smaller stores in townships where the retailer has historically not had a presence.
This new strategy was revealed on Wednesday when the company released its financial results for the year ended 25 June 2023.
The retailer saw a significant increase in earnings and profit following the disposal of its David Jones operations and strong results from its continuing operations.
Woolworths disposed of its David Jones operations on 27 March 2023, which led to a significant earnings boost for the company.
This removed about R18 billion in liabilities from the retailer’s balance sheet, enabling it to invest heavily in expanding its South African operations.
Having turned around its fashion division, the company plans to expand its clothing chain in South Africa’s lucrative township market.
Woolworths plans to open significantly smaller stores than its traditional 2,000 m² stores in shopping malls to access this market.
The company plans to open 20 stores in the next financial year, adding to its 10 existing stores in areas such as Gugulethu, Thembisa, and Giyani.
CEO Roy Bagattini said this should eventually increase to about 100 stores in the medium term.
The stock range in smaller stores is limited, but “it’s got a unique proposition in terms of product offering”, Bagattini said.
“The people working in those stores are also really skilled at styling and selling.”
In contrast to traditional stores that are typically self-help outlets, the smaller stores would have more involved customer service employees encouraging customers to try on clothing.
The smaller outlets would have shorter leases, and because of the limited stock on offer, it would be easier to replace items that do not sell.
R10 billion expansion
Woolworths’ efforts to expand its presence in townships is part of its R10 billion expansion plan that will take place over the next three years.
The company aims to expand the size of its existing stores, add new stores, and enhance its supply chain and distribution channels.
Bagattini said, “If I were our competitors, I would get worried.”
Woolworths currently has more than 400 stores across the country in various formats. It aims to grow its food business in South Africa and its liquor stores.
“Today, less than 1% of our revenue comes from alcohol. Most of our competitors have north of 10% coming from alcohol.”
“But we have a different approach to that, and we think we can actually put a proposition out there that we think will be really compelling Woolworths style, and we are going after that,” Bagattini told News24.
Woolworths also plans to expand its NOW NOW cafés.