Woolworths interim results to be boosted by improved festive season trading

Woolworth says its performance has been impacted by an increasingly challenging macroeconomic backdrop. Photo: Supplied

Woolworth says its performance has been impacted by an increasingly challenging macroeconomic backdrop. Photo: Supplied

Published Jan 24, 2024


Woolworths Holdings’ sales improved in the past few months of a 26 week trading period to December 24, following weak sales in Australia through most of the period and trading in South Africa that was impacted by load shedding.

Stronger festive season spending by consumers was also reflected yesterday in data from BankservAfrica, which showed that the total in-store card spend for December was R112.5 billion, up 13% from the R100bn the previous year.

Total shopping volumes increased 2% year-on-year, the BankServAfrica data showed. The highest spend and volumes were at grocery stores and supermarkets, which nearly doubled in value to R50bn from R26bn, with card transactions increasing 6%.

Woolworths interim headline earnings a share were expected to be more than 25% to 35% lower than the same time a year ago, but the figures were not comparable due to inclusion of David Jones’ results in the previous period.

In 2022 Woolworths said it would sell David Jones to improve cost controls, trading densities and renegotiate leases. Group headline earnings a share were expected to be between 191.4 cents and 220.9 cents.

Group sales from continuing operations grew 12.5%, driven in part by the post-Covid pent-up demand in Australia, a trading update said yesterday.

Turnover and concession sales increased by 5.4% and by 4.4% in constant currencies, excluding David Jones.

During the last six weeks of the period, which included trade during the festive season, sales growth accelerated to 7.2%.

Woolworth said the performance had been impacted by an increasingly challenging macroeconomic backdrop, given the interest rate increases and higher living costs in Australia and South Africa.

This negatively impacted footfall, resulting in a greater-than-expected pullback in discretionary spend.

“In South Africa, our business operations were further disrupted by higher levels of load shedding, congestion at the ports, and the impact of Avian flu on the availability of key food product lines,” directors said.

Group turnover and concession sales (including the six-month contribution of David Jones in the prior period, which is therefore non-comparable) decreased by 23.6% on the prior period on a total basis.

The Food business delivered solid growth. Turnover and concession sales grew by 8.4% and by 7.2% on a comparable store basis.

Underlying product inflation averaged 9.1%, below headline food inflation as further investment in price was made.

Food business sales grew 8.6% in the last six weeks, delivering positive underlying volume growth as product inflation eased to 7.9%. Space grew by 3.3%.

Online sales increased by 46.6%, contributing 5.1% of South African sales, driven by increased penetration of the on-demand Woolies Dash offering.

The Fashion Beauty and Home business’ sales were impacted by poor availability, due in part to the late arrival of certain summer ranges arising from congestion at the ports.

Turnover and concession sales grew by 2.2%, with comparable store sales increasing by 1.5%.

Sales growth in the last six weeks however improved to 3.8%, supported by Black Friday promotions and festive season trade.

A focus on full-price sales positively impacted price movement of 11.4%. Net trading space increased by 0.3%. Online sales grew by 26.9%.

The Woolworths Financial Services book reflected a year-on-year increase of 4.9%, driven by growth in new accounts and credit card advances.

In the Country Road Group (CRG) in Australia and New Zealand, trading conditions deteriorated further, with consumer sentiment in Australia at near-record lows, and household savings also at very low levels.

In addition, the retail industry was impacted by a shift in spending away from goods, to services.

CRG sales fell by 5.0% and by 9.5% in comparable stores, off a high prior period base, in which sales grew by 25.5%, following the strong recovery from the Covid-impacted lockdowns.

Sales growth in the last six weeks was positive, at 1.3%.

Trading space increased 6.6%, supported by expansion of the wholesale and concession channels. The contribution from online sales rose marginally to 26.8% of total sales.