Amidst a challenging economic landscape, Woolworths, a prominent retail group in South Africa, has demonstrated resilience and steady growth in its sales for the 20-week period ending on November 12, 2023. Despite facing headwinds from various external factors, the company has showcased positive figures in its turnover and concession sales, underscoring its commitment to navigating turbulent market conditions.
The group’s turnover and concession sales from continuing operations displayed notable growth rates, increasing by 4.7% and 3.9% respectively in constant currency terms. This growth, however, excludes the impact of David Jones, which was divested in the prior period. Despite the overall growth, when factoring in the contribution of David Jones in the previous period, the group experienced a decline of 22.4% in total turnover and concession sales.
Explaining the challenges faced, the group highlighted the persistent impact of interest rate hikes, elevated living costs, and their subsequent effect on footfall and discretionary spending across both regions. Furthermore, in South Africa, the company encountered disruptions due to external factors such as the Western Cape taxi strike, port congestion, and the consequences of the Avian flu outbreak on key product availability.
Regarding the local operations, Woolworths acknowledged the weakened economic environment in South Africa, accentuated by the ongoing energy crisis, which significantly impacted business and consumer confidence. Despite these challenges, the group emphasized its dedication to quality, continual investment in value propositions, and an intensified focus on execution, resulting in reinforced trust in the brand among consumers.
The company’s food business displayed resilience, showcasing underlying growth with turnover and concessions sales up by 8.4% and 7.2% respectively on a comparable basis. Notably, despite the Avian flu outbreak affecting egg and poultry availability, the online sales surged by 46.2%, contributing 5% to total South African sales, primarily driven by increased usage of Woolies Dash.
However, the Fashion, Beauty, and Home business faced certain hurdles in the latter part of the 20-week period due to delays in the arrival of summer ranges caused by port congestion. Nevertheless, the turnover and concession sales in this segment grew by 1.4%, with comparable store sales in line with the previous year. Despite a marginal decline in net trading space, online sales registered a robust 23.0% growth, constituting 5.2% of South African sales.
Moreover, the Woolworths Financial Services Book indicated a positive year-on-year increase of 10.7% at the end of October, primarily attributed to new accounts and credit card advances. Despite a slight increase in the impairment rate from the prior period, the group noted a gradual reduction from the previous financial year’s peak, reflecting the strain on consumers amidst the current macro-economic challenges.
In line with the challenging trading conditions globally, Woolworths’ Country Road Group experienced a decline in retail sales due to adverse situations in Australia and New Zealand. Sales for the Country Road Group dipped by 8.1%, with comparable stores experiencing a decline of 10.7%. Despite this downturn, the company remains optimistic about its expansion plans in wholesale and concessions, showcasing a 4.3% increase in trading space while witnessing online sales contributing 26.0% to total sales.
In summary, despite a challenging macro-economic backdrop and various disruptions in South Africa and other key regions, Woolworths remains committed to navigating these challenges by focusing on profitability and executing robust trade plans, especially during the upcoming festive season. The company’s resilience, strategic initiatives, and consumer trust position it well to weather the persisting economic headwinds and continue its growth trajectory in the region’s retail landscape.
