Woolworths saved by food sales as clothing declines


Woolworths saved by food sales as clothing declines

Published Date: 2020-07-27 | Source: Stephen Gunnion | Author: Stephen Gunnion

Woolworths saved by food sales as clothing declines

The retailer benefitted from a big rise in online sales as it marked down merchandise to manage inventory and generate cash.

Woolworths has reported a slight dip in full-year sales after it was forced to close most of its non-food stores. Food sales rose strongly though, with online sales taking off as more consumers shopped from home.

In a sales update, the retailer reported a 0.1% decline in sales for the year to to 28 June on a comparable 52-week basis. Food sales rose 10.7% while turnover at its fashion, beauty and home (FBH) division declined by 10.7%. Online food sales jumped 88% in the second half of the year while online FBH sales were up 41%. In Australia, its David Jones department stores reported a 6.3% fall in sales and Country Road's were down 14.3%, with both chains reporting stronger online sales.

The retailer said the second half of its financial year was significantly impacted by Covid-19 following the temporary closure of the majority of its non-grocery stores, coupled with the decline in foot traffic and consequent loss of trade. As restrictions were eased from the beginning of May, turnover and concession sales grew by 4.7% in the last nine weeks versus a 17% decline in the preceding eight weeks. It marked down merchandise through promotions and clearance sales to help generate cash. While this negatively impacted its profit margins, it resulted in better inventory levels and an improved working capital and net gearing position at year-end.

Its financial services division was also impacted by the closure of stores, lower non-essential spend and this year's interest-rate cuts, all of which placed pressure on book and revenue growth. The deterioration in customer collections and macroeconomic indicators resulted in higher impairments over the period. The impairment rate rose to 7.9% from 3.7% last year.

Woolworths said its balance sheet remained strong due to its cash management, proactive engagement with its banks and other operational actions taken. A further trading statement would be issued once it had an idea of its earnings range for the year.

Its shares fell 1.7% to R30.67 on Friday.

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