South African retail giant Woolworths Holdings Limited released a trading update and statement today, shedding light on the company’s performance for the 26 weeks ending December 24, 2023.
Group Performance
The group’s turnover and concession sales, excluding the prior year’s disposal of David Jones, grew by 5.4% during the current period, with a 4.4% increase in constant currency terms. However, the high prior period base, influenced by post-Covid pent-up demand in Australia, sets the context for this growth. The last six weeks, including the crucial festive season, saw sales surge by 7.2%, supported by robust trade plans.
The company faced challenges due to an increasingly challenging macroeconomic backdrop, including sustained interest rate increases, higher living costs, and disruptions such as loadshedding, port congestion, and Avian flu in South Africa.
Woolworths (South Africa)
Woolworths’ Food business stood out, delivering solid growth with an 8.4% increase in turnover and concession sales. Despite challenges, including increased loadshedding and the impact of Avian flu, the business showcased resilience. Underlying product inflation averaged 9.1%, remaining below headline food inflation, and online sales contributed significantly, increasing by 46.6%.
The Fashion Beauty and Home business faced hurdles with poor availability impacting sales growth to 2.2%, but the last six weeks showed improvement at 3.8%, supported by successful Black Friday promotions and festive season trade.
Woolworths Financial Services reported a year-on-year increase of 4.9%, reflecting growth in new accounts and credit card advances. However, the annualized impairment rate for the six months ending December 2023 increased to 6.3% from 5.5% in the prior period.
Country Road Group (Australia and New Zealand)
The Country Road Group faced challenging trading conditions in Australia and New Zealand, with sales declining by 5.0%. The retail industry experienced a shift in spending from goods to services, impacting comparable store sales, which decreased by 9.5%. However, the Country Road brand performed well, with positive sales growth of 1.3% in the last six weeks.
Online sales for the Country Road Group contributed 26.8% of total sales, reflecting a slight increase, while trading space expanded by 6.6% during the period.
Trading Statement and Financial Outlook
The trading statement for the first half of the 2024 financial year revealed that results are not directly comparable to the prior period due to the inclusion of David Jones. Earnings per share (EPS), headline EPS (HEPS), and adjusted diluted HEPS (adHEPS) for the current period are expected to be more than 20% lower than the reported figures for the prior period.
A summary of the expected ranges is presented in the table below:
| Metric | December 2022 Reported (cents) | December 2023 Expected Range (%) | December 2023 Expected Range (cents) |
|---|---|---|---|
| EPS | 293.7 | -25.0% to -35.0% | 190.9 to 220.3 |
| HEPS | 294.5 | -25.0% to -35.0% | 191.4 to 220.9 |
| adHEPS | 284.7 | -20.0% to -30.0% | 199.3 to 227.8 |
While the company maintains a stringent focus on managing inventory and containing costs, challenges in the apparel businesses, especially in Australia, are expected to result in lower EPS, HEPS, and adHEPS compared to the prior period.
The group’s results for the interim period are expected to be released around February 28, 2024. The trading statement has not been reviewed or reported on by the Group’s external auditors.
