Woolworths feeling the heat

Woolworths reported poor results for the 2024 financial year, as the retailer’s profit nearly halved.

Woolworths released its results for the 53 weeks through June 2024, which revealed a significantly weaker performance from the retailer.

While revenue was up 6.4%, Woolworths’ profit for the year declined by almost 50%, going from R5.08 billion in 2023 to R2.60 billion.

The retailer’s operating profit declined by 10% to R5.97 billion, compared to R6.64 billion the year prior.

Woolworths’ earnings per share also nearly halved, declining from 551 cents per share in 2023 to 289.2 cents – a 47% decrease.

The retailer previously warned that it would be taking some pain this year, saying its performance was impacted by an increasingly challenging trading environment, largely by virtue of the macro-economic environment, which deteriorated throughout the year across both geographies. 

“This was particularly evident in Australia, as sustained interest rate increases and higher costs of living continued to impact consumer confidence, footfall and spend,” the company said. 

“In South Africa, business operations were further disrupted by congestion at the ports for most of the period, as well as the impact of taxi strikes and Avian flu in the first half.”

In particular, Woolworths said its earnings were impacted by the R609 million non-cash impairment of the Politix brand’s goodwill in its Country Road Group.

The retailer said that, despite the difficult operating environment, its combined South African business grew turnover and concession sales by 6.7% and operating profit by 5.9%, both ahead of inflation. 

Woolworths specifically highlighted its food business, which it said delivered market-leading like-for-like sales growth and expanding margins. 

Turnover and concession sales grew by 11.2% for the 53 weeks. On a comparable 52-week period, sales grew by 9.0% and by 6.9% on a comparable store basis, notwithstanding the impact of taxi strikes and Avian flu in the first half. 

Price inflation averaged 7.9% for the period.

Sales growth of 9.6% in H2 includes the Absolute Pets acquisition in the last quarter. Adjusting for this, H2 turnover and concession sales grew by 8.5%, reflecting continued strong underlying momentum and market share gains. 

In addition, price movement in H2 eased to 6.7%, delivering improved and positive volume growth. 

Trading space grew by 3.2%, while online sales increased by 52.8%, contributing 5.5% of South African sales. 

This was driven, in part, by increased penetration of the retailer’s Woolies Dash offering, which delivered strong growth of 71.2%, supported by extended trading hours and increased slot availability. 

In light of these results, Woolworths’ board declared a dividend of 117.5 cents per share – an almost 24% decrease from the previous year.