By: Ashley Lechman- IOL

In its trading update for the half-year ended 29 December 2024, the Woolworths group reported a solid increase in turnover and concession sales, rising by 5.7% compared to the preceding period.

The performance reflects a 6.2% rise on a constant currency basis against the 26-week comparative period that concluded on 24 December 2023.

However, the results reveal a contrasting picture when dissecting the performance across its various business segments.

In South Africa, the retail giant benefitted from a gradual recovery in consumer sentiment, attributed largely to easing inflation, interest rate adjustments, and an ongoing suspension of load shedding.

This backdrop saw Woolworths South Africa achieve 9.1% growth in turnover and concession sales.

Notably, its Food business outperformed, registering a remarkable 11.4% growth, driven by improved availability and an innovative product range that resonated with customers.

Despite these positive strides in the Food division, the apparel segments have been less fortunate.

The Fashion, Beauty and Home (FBH) and Country Road Group (CRG) divisions are currently undergoing significant transformations, which negatively impacted their performance, leading to weak sales uptake and lower contributions from apparel ventures across South Africa, Australia, and New Zealand. Thus, while the Group's overall growth stands at 5.7%, the contribution of these segments was markedly lower.

During the past eight weeks, sales growth softened to 4.3% due in part to a shift in the trading calendar compared to the prior period, revealing that consumers may be holding back their discretionary spending.

Reflecting broader trends, online sales saw a considerable uptick, with Woolworths’ online market accounting for a notable 6.4% of Food sales—a sign of changing consumer preferences amid ongoing challenges.

Across the waters in Australia, the Country Road Group faced a more difficult landscape, where consumer spend remains cautious due to high interest rates and increased living costs.

With apparel sales declining by 6.2% during the period, the separated CRG business is in a crucial restructuring phase as it seeks to align its operational models ahead of the 2025 financial year end.

The mix of results was further complicated by the Group's strategic decisions, particularly the recent disposal of a high-value property asset—located at 294 to 310 Bourke Street in Melbourne—for A$223.5 million.

This move is expected to yield a significant earnings per share (EPS) boost, projected to rise between 18.0% and 23.0% over the prior period.

However, the contrasting performance of the Food and apparel sectors has resulted in negative operational leverage for the Group.

While Woolworths’ Food business continues to thrive, projections suggest that headline earnings per share (HEPS) and adjusted diluted HEPS will fall below the prior year's figures, with forecast ranges reflecting this downturn.

As the fashion and beauty arms of the Group continue to navigate transformation and market pressures, Woolworths said it remains committed to reinforcing its place in the hearts of consumers through innovation and adaptation in an ever-evolving retail landscape.

Whatsapp