Woolworths bemoans Eskom, Transnet issues as earnings drop

Woolworths expects its earnings for the first half of the 2024 financial year to be up to 10% lower compared to the first half of 2023.

In a trading update released this morning, Woolworths said the economic environment in South Africa remains challenging.

It said this environment was exacerbated by the country’s energy and logistics crises, which continue to impact business and consumer confidence. 

In H1 2024, Woolworths’ food business delivered solid growth, re-enforcing its strength and resilience. 

Turnover and concession sales grew by 8.4% and 7.2% on a comparable store basis, notwithstanding the impact of increased load-shedding and the Avian flu. 

Underlying product inflation for the period averaged 9.1%, below headline food inflation. 

Sales grew by 8.6% in the last six weeks of the period, delivering positive underlying volume growth as product inflation eased to 7.9%. 

Space grew by 3.3% over the prior period, while online sales increased by 46.6%, contributing 5.1% of South African sales, driven primarily by increased penetration of the retailer’s on-demand Woolies Dash offering.

While its fashion, beauty, and home business continues to make steady progress, sales for the 26-week period were impacted by poor availability.

This is due, in part, to the late arrival of certain summer ranges arising from congestion at South Africa’s ports. 

Turnover and concession sales grew by 2.2%, with comparable store sales increasing by 1.5%. 

Sales growth in the last six weeks of the period improved to 3.8%, supported by the successful execution of Woolworths’ Black Friday promotions and festive season trade. 

Woolworths said its investment in “various strategic initiatives” and the impact of subdued discretionary spend on the profitability of its apparel businesses – particularly in Australia – could see the company’s earnings per share (EPS) and headline earnings per share (HEPS) from continuing operations fall significantly.

“This should be further considered in the context of a high prior year base in which EPS, HEPS and adHEPS (adjusted HEPS) from continuing operations grew by 44.7%, 44.9%, and 48.3%, respectively,” the company said.

Woolworths’ earnings are expected to be within the following ranges –

The company’s results for the interim period are expected to be released on or about 28 February 2024.