Woolworths disaster

Woolworths’ latest trading statement revealed it struggled to grow revenue and contain costs. Instead of taking responsibility for its poor performance, it used every excuse in the book.

On Wednesday, Woolworths released a trading update and trading statement for the 53 weeks ended 30 June 2024.

It highlighted that it disposed of its David Jones operations in Australia during the third quarter of the 2023 financial year.

Woolworths bought Australian retailer David Jones in 2014 for R21.4 billion. A decade later, it sold the David Jones operating entity for R1.1 billion.

Turnover and concession sales for the group, including David Jones’s contribution for the nine months in the prior year, decreased by 16.4%.

On a comparable 52-week period that ended 23 June 2024, sales grew by 4.3%, and by 3.2% in the comparable second half of the year.

This means Woolworths’s sales were below inflation. It shows that revenue actually decreased in real terms – when adjusting for inflation.

One particularly poor segment was Country Road Group, whose revenue decreased by 13.1% on a like-for-like basis.

Woolworths is, therefore, struggling to grow the business and increase revenue despite its strong position in the market.

Even more concerning was that its earnings per share (EPS), headline EPS (HEPS) and adjusted diluted HEPS (adHEPS) from continuing operations plummeted.

EPS is expected to be down between 32.0% and 37.0%, while HEPS is expected to decline by 14.0% to 19.0%.

This means Woolworths’ net profit will fall from the previous year’s R5 billion to between R3.2 billion and R3.5 billion.

It looks even worse when the numbers include the contribution of David Jones in the prior period. When it is considered, EPS is down between 45.0% and 50.0% and HEPS is down between 27.0% and 32.0%.

Woolworths tried to convince investors it was not to blame for these poor results. Instead of taking responsibility, it looked for excuses.

In February, Woolworths said higher load-shedding levels, congestion at the ports, and the impact of Avian flu disrupted its operations.

It added that its performance was impacted by an increasingly challenging macroeconomic backdrop, given the sustained effect of interest rate increases and higher living costs.

Since then, load-shedding and congestion at the ports eased. However, it stuck with its “weak consumer confidence” and “higher living costs and elevated interest rates” excuses this time around.

“Whilst we have no control over the macro factors impacting our business, we have remained resolutely focused on executing our strategies,” it said.

However, this week Shoprite revealed that it increased the total sale of merchandise by 12.0% to approximately R240.7 billion.

The group’s core business, Supermarkets RSA, achieved sales growth of 12.3%, contributing 81.0% to group sales.

Checkers and Checkers Hyper reported sales growth of 12.3%. Checkers Sixty60’s sales increased by 58.1%.

This shows that it is possible to significantly outperform inflation in South Africa and other markets with a good strategy and execution.

The market did not take kindly to the results. The Woolworths share price plummeted over 5% when trading opened on Wednesday.

Woolworths trading update summary