Woolworths beats load shedding with strong results
Buoyed by its Australian acquisitions and increased market share, retailer Woolworths' full-year profits increased by 24.3% with adjusted headline earnings rising to R3.75bn in the year ended 28 June 2015.
Its acquisition of David Jones and full ownership (acquisition of the remaining 12%) of Country Road - both Australian companies - enabled Woolworths to scale its operations, said the company's CEO Ian Moir.
“(It has enabled) us to make a step change in the scale of our operations, transforming it into a quality retailer with significant scale across sub-Saharan Africa and Australasia,” he said.
“This is a strong set of results, particularly considering the amount of change the group has undergone due to our new investment in Australia and the tough trading conditions that prevailed in both our major markets.”
Woolworths said its performance in South Africa was not hampered by the Australian deal. “(It performed) well, despite the constrained economic environment and the impact of load shedding on our trading performance,” the company said.
Economic conditions will remain constrained
While Eskom has managed to supply electricity uninterrupted for the past 18 days, the 99 days of load shedding implemented in 2015 caused manufacturing and mining output to decrease, Statistics SA figures show.
Trade in SA, which made up 14% of nominal GDP, contracted by 0.6% in the second quarter of 2015, Stats SA explained when announcing a 1.3% contracted GDP this week.
Woolworths warned that economic conditions in South Africa and Australia would remain constrained, “especially in the lower and middle-income segments of the market”.
“We believe that economic conditions in South Africa and Australia will remain constrained, although the upper income segments in which we operate continue to show some resilience. We continue to trade ahead of the market and trading for the first eight weeks of the new financial year has been positive.”
Growth in key sectors
Cash inflow from trading saw Woolworths bring in R5bn, while David Jones brought in R1.8bn and Country Road R1bn. “David Jones sales grew by 10.7% and outperformed the department store sector in Australia,” Woolworths said in its financial report.
Woolworths clothing and general merchandise sales grew 9.6% and 4.0% in comparable stores, but sales were impacted by a late winter.
Food sales grew by 13.5% and continued to gain market share, while Woolworths Financial Services grew net interest income by 15.5%.
Its BEE Employee Share Ownership Scheme created R2.4bn in value for over 7 500 participants, and the scheme has paid out R332m in dividends since 2007.