Woolworths feels the pain

Woolworths’ revenue and profits have taken a hit as consumers continue to find themselves under pressure in South Africa and Australia with little cash to spend. 

This was the company’s first set of results without Australian retailer David Jones included, following Woolworth’s sale of the company last year. Thus, the results are not directly comparable. 

However, even if David Jones’ contribution to the prior period’s results are excluded, Woolworth’s revenue and profit still came under pressure. 

Group turnover for the period was down 16.7% to R37.5 billion; however, when looking at its continuing operations, the value was marginally higher at 5.1%.

Profit from continuing operations took a heavy hit, declining by 14.2% before tax, while headline earnings per share declined by 7.4%. Woolworths cut its interim dividend by 6.6% to 148 cents per share.

Woolworths attributed these declines to an “increasingly challenged macro-economic backdrop, given the sustained effect of interest rate increases and higher living costs”.

This resulted in fewer consumers visiting Woolworth’s stores and, in particular, its fashion brands, such as Country Road and Trenery, in both South Africa and Australia. 

Sales at the Country Road Group fell by over 5% versus the prior period.

Higher living costs resulted “in a greater-than-expected pullback in discretionary spend in both geographies”.

In South Africa, Woolworths lamented the impact of higher levels of load-shedding, congestion at local ports, and the impact of Avian flu on the availability of key food product lines.

However, there were encouraging signs towards the end of the reporting periods. 

In the last six weeks of the period, which includes festive season trading, sales growth accelerated to 7.2%. 

Furthermore, Woolworth’s core food brand continued to go from strength to strength, with its sales growing by 8.4% compared to the prior period. 

Product inflation in the food business slowed to 7.9% towards the end of the period, enabling the company to grow its margin on its food products to 24.6%. 

Woolies Dash, the company’s food delivery service, continued to grow strongly, with its sales rising by 46.6%. However, it still only contributed 5.1% of total food sales. 

Woolworths expects the rest of the 2024 financial year to be challenging, with interest rates remaining elevated in South Africa and Australia. 

In South Africa, the company expects no quick fixes to the ongoing energy crisis and port bottlenecks.