Woolworths hit by waning confidence in South Africa and Australia


Woolworths hit by waning confidence in South Africa and Australia

Published Date: 2017-08-25 | Source: Stephen Gunnion | Author: Stephen Gunnion | Comments

Woolworths hit by waning confidence in South Africa and Australia

The retail group suffers its first annual decline in eight years.

Woolworths is finding out that geographical diversity is no guarantee of resilience, with weak consumer confidence in both markets it operates in affecting its performance over the past year.

Results for the year to 25 June show a 3% rise in group sales, as political uncertainty in South Africa weighed on second-half trading, while Australian consumers are also being more careful.

While good sales grew by 8.6%, comparable store sales were up 4.6% and that was after it raised prices by an average 8.4%. However, it says lower food inflation into the second half had a positive effect on volume growth.

Clothing and general merchandise sales were up by just 1.4%, with comparable store sales down by 0.9% and price hikes of 6.6%. Still, it claims it traded ahead of most other apparel retailers. Its gross profit margin fell 40 basis points to 47.9% as it discounted more clothing.

In Australia, the David Jones department store chain increased sales by 1% in Australian dollar terms. Same store sales fell 0.7%. Woolworths says although consumer sentiment worsened in the second half, its share of the department store and specialty market grew marginally. Country Road sales were up 5.1% in Australian dollars and showed a marked improvement in the second half, including the recently-acquired Politix business, which added 3.7% to growth. While David Jones' gross profit margin fell 90 basis points to 37% due to promotions and markdowns, Country Road's margin increased by 90 points to 60.3%.

Group turnover and concession sales were up 3% to R74.3 billion. Earnings per share rose close to 25% to 566.7c, boosted by the R1.76 billion profit on the disposal of a David Jones property in Sydney. Headline earnings per share fell 7.6% to 420.9 cents. It's maintained its dividend at 313c.

Woolworths says the year has started pretty much the same as 2017 ended. It says market conditions are likely to remain constrained by the same economic and political conditions it faced last year.

Shares in Woolworths declined 2.5% to close at R64.35 yesterday.

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