By Lehlohonolo Lehana.
Retail giant Woolworths did not grow interim sales volumes in any of its businesses due to the weak economic environment, but its food business remains the best performer, with its SA clothing divisions maintaining high profit margins.
Woolworths Food saw turnover and concession sales grow by 8.4% and 7.2% on a comparable store basis, respectively. This was despite load shedding, Avian flu, and the widespread taxi strike in Cape Town.
Sales increased by 8.6% in the last six weeks of the period, which underlined volume growth, with product price inflation at 7.9%.
The on-demand grocery shopping market in South Africa has ballooned in recent years, led by Shoprite Holdings’ market-leading Checkers Sixty60 app, which took off during the Covid-19 pandemic when consumers were encouraged to stay at home. At end-January, Shoprite reported half-year sales growth for Sixty60 of 63.1%.
The increasingly crowded market now has Checkers, Pick n Pay, Woolworths and Spar all jockeying for position alongside the retailer-agnostic, Massmart-owned OneCart and the independent app Zulzi.
Meanwhile, in the Fashion, Beauty and Home category, Woolworths said it reported a 26.9% increase in online sales, contributing 5.4% to total South African sales.
At a group level, Woolworths reported a 7.5% fall in half-year earnings as consumers pulled back on discretionary spending and South Africa’s energy and logistics crisis persisted.
The food, fashion and beauty products retailer, which targets mid- to upper-income consumers, said its headline earnings per share from continuing operations fell to 203.3c from 219.9c a year earlier. For total operations, Heps declined by 31%.
Group turnover and concession sales from continuing operations, excluding retailer David Jones that it sold last year, rose 5.4% to R38.1-billion, or by 4.4% in constant currency terms. Profit before tax fell by 14.2% to R2.5-billion.
Woolworths said its results were impacted by an increasingly challenging macroeconomic backdrop, given the sustained effect of interest rate increases and higher living costs.
“This negatively impacted footfall, resulting in a greater-than-expected pullback in discretionary spend in both geographies,” it said, also referring to Australia.
In South Africa, business operations were further disrupted by higher levels of power cuts, congestion at ports due to equipment failures and the impact of Avian flu on the availability of key food product lines.