Woolworths rolls with Australian punches

Woolworths has achieved significant sales growth despite its troubles in Australia and New Zealand, which have strained the company’s performance.

This was revealed in a trading update Woolworths released on Monday, detailing its performance for the 18 weeks ended 3 November 2024.

Woolworths’ group turnover and concession sales increased by 6.5% compared to the previous year.

The retailer’s South African operations performed well, with its food business growing sales by 12.1%. The business’ sales grew by 7.3% on a comparable store basis.

The company said this was driven by positive underlying volume growth on improved availability, ongoing innovation, and the retailer’s enhanced overall value proposition.

Excluding Absolute Pets, which Woolworths acquired in the fourth quarter of the previous financial year, food sales increased by 9.6%.

Price inflation for the period averaged 6.2%, with trading space, excluding Absolute Pets, increasing by 2.0% compared to the prior period.

“In South Africa, whilst discretionary spend remains relatively constrained, consumer sentiment is improving, supported by moderating inflation, the start of easing interest rates, and the prolonged suspension of load-shedding, amongst other factors,” the retailer said.

The retailer’s online sales saw impressive growth of 36.9%, contributing 6.2% of food sales. This was driven by Woolworths’ on-demand offering, Woolies Dash, which delivered sales growth of 54.4%.

Woolworths’ Fashion, Beauty and Home business saw a more muted sales growth of 3.5%, or 2.8% on a comparable store basis.

The retailer explained that the first 18 weeks of sales include the fashion winter clearance, which constitutes a high proportion of the trade for the period and resulted in a price movement of 1.9% for the segment, with the fashion division seeing a deflation of 0.3%. 

The beauty division performed better, with sales growth of 20.6%.

However, Woolworths took a significant hit from its Country Road Group, which is its Australian and New Zealand business.

The retailer said trading conditions in these two markets continue to prove more challenging than anticipated, with the retail sector facing further declines in footfall, intense promotional activity and the shift of spend towards value brands.

This meant the business’ sales declined by 8.8% for the 18-week period and by 13.8% on a comparable store basis.

“Notwithstanding the challenging macroeconomic backdrop, the Country Road brand remains resilient, and Trenery is delivering strong topline growth following the repositioning and rebranding of its offering,” the retailer said.

“We remain focused on improving the positioning and performance of the other brands, particularly Witchery, which are at different stages of their respective repositioning.”