Skip to main content

Woolworths sales hit by load shedding and unseasonal weather

| Retailer trading results

Woolworths on Thursday (20 February), reported a substantial drop in earnings for the 26 weeks ended 29 December 2019, leading to a reduced interim dividend.

The food and fashion retailer said that in South Africa the constrained economic environment, power outages, unseasonal weather in parts of the country, and underperformance in clothing led to a slower second quarter.

It noted that on a macro level growth remained weak in South Africa and well below potential, further impacted by load-shedding.

It added that 2019 retail sales growth averaged 1.2% – the weakest rate since 2009.

Group turnover and concession sales increased by 3.8% to R40.9 billion and adjusted profit before tax of R2.4 billion was down 12.3%.

Woolworths said that earnings per share and headline earnings per share decreased by 9.0% and 10.1% respectively.

Adjusted diluted HEPS decreased by 11.7% to 179.1 cents per share.

The group declared an interim gross cash dividend of 89.0 cents, a 3.3% decrease on the prior period’s 92.0 cents per share.

Group turnover and concession sales for the 26 weeks ended 29 December 2019 increased by 3.8% compared to the 26 weeks ended 23 December 2018 and by 4.6% in constant currency terms.

Woolworths Fashion, Beauty and Home (FBH)

Sales and comparable store sales both grew by 2.2% and by 0.9% after adjusting for the shift in trading weeks. Price movement in Fashion categories was 4.0% and overall net space growth across FBH was 1.2%.

Woolworths said that its Black Friday performance was disappointing “due to under-participation”. It said that womenswear underperformed as a result of some product failure, a lack of newness in summer and higher price points, which also impacted sales and volumes.

Gross profit margin decreased by 0.5% to 46.6% mainly due to stock write-offs as South African brands exit the  Australian market. Expenses grew by 4.8%, while store costs increased by 3.7%, resulting in negative operating leverage.

Operating profit decreased by 8.9% to R834 million, with an operating margin of 11.5%.

Woolworths Food

Turnover and concession sales increased by 8.1%, and by 7.8% after adjusting for the shift in trading weeks, with comparable-store sales 5.4% higher and price movement of 5.1%.

The business has maintained positive volume growth for the period and continues to grow market share, the group said. Net space growth was 4.0%.

Gross profit margin of 24.6% was in line with the prior period despite further price investment.

Expenses grew by 8.5% and operating profit increased by 8.0% to R1,157 million, with an operating margin of 6.9%.

Woolworths Financial Services

The Woolworths Financial Services book reflected positive year-on-year growth of 8.3% as at the end of December 2019. The annualised impairment rate for the six months ended 31 December 2019 was 3.3% (six months ended 31 December 2018: 3.2%).

Looking ahead, Woolworths said that in South Africa, consumers remain under pressure from a weak economy amid continued power outages.

FBH will focus on improving performance through better pricing and ranges, particularly in womenswear, it said. Food is expected to continue to trade ahead of the market, the group said.

“Online is an increasingly important channel for the group and we continue to invest in this growth driver,” it said.

In South Africa, the group reported online sales up 29. 5% for its FBH division, with strong online sales growth, up 22.3%, for food.

Woolworths warned that the Coronavirus is expected to impact sourcing of FBH product.


Related Articles

Shoprite first-half sales rise 14%

By Andries Mahlangu - BusinessLive Africa’s biggest grocery retailer Shoprite reported robust growth in sales in the six months ended December, with all its various store formats coming to the party save for its furniture business.  It...

Port chaos and bird flu hit Woolworths sales

  By: Nick Wilson – News24 Shares in Woolworths fell nearly 2% on Tuesday morning after it warned that SA's sputtering economic growth, a bird flu epidemic, and port chaos contributed to volume declines in its local food and fashion busines...

Spar’s IT system failure has cost the company R...

By: IOL News Local retailer Spar has been hit hard this financial year and said on Thursday that it will have to withhold a final dividend to save cash after a huge IT system failure this year.

Tough decisions made, sets the tone for a more ...

The SPAR Group lifted turnover 10.1% to R149.3 billion (2022: R135.6 billion) for the year ended 30 September 2023. This was largely driven off the back of strong performance from the Irish business which saw growth of 21.9% in ZAR terms. Souther...

Woolies’ online grocery sales surge

By: Myles Illidge – My Broadband Woolworth’s trading update for the 20 weeks ended 12 November 2023 has revealed that the increased penetration of its Woolies Dash food delivery service resulted in a significant increase in online sales.