Woolworths delivers resilient result in tough macro environment, maintains 70% dividend payout
Woolworths Holdings Limited (WHL) delivered a resilient result in its core Woolworths South Africa business, notwithstanding the challenging macro environment and a high prior-year base.
HIGHLIGHTS
On a 52-week comparable basis for continuing operations*:
* To facilitate year-on-year comparison on a 52-week basis, this media release is focused on the pro forma 52-week financial information for continuing operations. The Group results are for the 53 weeks ended 30 June 2024, and not directly comparable to the 52 weeks ended 25 June 2023. Additionally, as previously reported, the Group disposed of David Jones in Australia during the 3rd quarter of the 2023 financial year.
Commenting on the results, WHL Group CEO, Roy Bagattini said:
“Once again, our results have demonstrated the advantages of our diverse portfolio, our trusted brands, key competitive advantages, and the dedication and enthusiasm of our committed teams. We continue to make significant progress against our strategic initiatives, and are on the right course to building a bigger, better, and far stronger business – fortifying our position as South Africa’s pre-imminent retailer and one of the country’s leading brands.”
Performance for the period was impacted by an increasingly challenging trading environment, largely by virtue of the macro-economic environment, which deteriorated throughout the year across both geographies. This was particularly evident in Australia, as sustained interest rate increases and higher costs of living continued to impact consumer confidence, footfall and spend. In South Africa, business operations were further disrupted by congestion at the ports for most of the period, as well as the impact of taxi strikes and Avian flu in the first half of the financial year.
WOOLWORTHS FOOD
Woolworths Food delivered market-leading like-for-like sales growth, re-enforcing its strength and resilience, and the trust customers place in our Woolies brand. Turnover and concession sales grew by 9.0% for the 52-week comparable period and by 6.9% on a comparable store basis. Underlying product inflation for the period averaged 7.9%. Sales growth of 9.6% in the second half of the financial year (H2) includes the Absolute Pets acquisition in the last quarter. Adjusting for this, H2 turnover and concession sales increased by 8.5%, reflecting continued strong underlying momentum and market share gains. Price movement eased to 6.7%, delivering improving and positive volume growth. Space grew by 3.2% over the prior period, while online sales increased by 52.8%, contributing 5.5% of South African sales, driven by increased penetration of our Woolies Dash offering which delivered sales growth of over 70%.
Gross profit margin increased by 30bps to 24.7%, driven by more targeted and effective promotions, reduced waste, as well as value chain efficiencies, which more than offset the higher cost of the online channel and the ongoing investment in price. Woolworths Foods has invested almost R900 million in price over the past few years, re-affirming Woolies’ trusted value proposition in the marketplace.
Operating expenses increased by 9.7%, impacted by the investment in new initiatives and online channels. Adjusted operating profit grew by 12.3% to R3.3 billion, returning an improved operating profit margin of 7.1%
WOOLWORTHS FASHION, BEAUTY AND HOME (‘FBH’)While FBH continues to make steady progress against its strategic priorities, sales for the period were impacted by the weak macro environment, poor product availability and increased competition from the disruptive entry of international online retailers. Turnover and concession sales for the 52 weeks declined by 0.4%, with comparable store sales decreasing by 1.3%. Sales growth in H2 declined by 2.9%, with sales volumes further impacted by the late onset of winter. Our teams remain focused on full-price sales, which positively impacted price movement of 8.9%. Net trading space decreased by 0.2% relative to the prior period, while online sales increased by 30.4% and contributed 5.6% of South African sales.
Notwithstanding inflationary supply chain costs and the margin dilutive impact of a strongly growing Beauty contribution, the improved gross profit margin was maintained at 48.5%, given the continued focus and further improvement in full-price sales and markdown metrics. Expense growth was well managed to below inflation at 2.6%. Adjusted operating profit decreased by 9.9% to R1.8 billion, resulting in an operating margin of 12.0% for the current period.
WOOLWORTHS FINANCIAL SERVICES (‘WFS’)The WFS book reflects a year-on-year increase of 1.8%, excluding the sale of part of the legal book in June 2024. The impairment rate for the 12 months ended 30 June 2024 moderated to 7.0%, compared to 7.3% in the prior period and remains sector leading.
COUNTRY ROAD GROUP (‘CRG’)
Retail trading conditions in Australia and New Zealand deteriorated further in the second half, with consumer sentiment at near-record lows, and household savings at a 17-year low. In Australian Dollar (A$) denominated terms, CRG sales for the 52 weeks declined by 8.0% and by 13.1% in comparable stores, off a high prior period base in which sales grew by 12.0% following the strong post-COVID pent up demand in the first half of the prior period. Sales in H2 declined by 11.3%. Notwithstanding the macro-economic challenges, the Country Road brand delivered its strongest performance on record. Overall trading space increased by 4.0% during the period, supported by the ongoing expansion of our wholesale and concession channels. The contribution from online sales increased to 27.6% of total sales, supported by our leading omni-channel capabilities.
Higher promotional activity to manage inventory levels, and the impact of a weaker Australian Dollar on input costs, resulted in a 230bps decrease in the gross profit margin to 60.3%. Core expenses were well controlled, increasing by a modest 3.6%, notwithstanding the impact of gross margin dilution, coupled with investment in new distribution channels and the cost dis-synergies emanating from the DJ’s separation. Adjusted operating profit decreased by 66.0% to A$51.3 million, returning an operating profit margin of 4.6%.
OUTLOOK*
In South Africa, prospects appear more positive following the national election and theformation of the Government of National Unity, as well as the suspension of loadshedding. Whilst inflation is easing, the trading environment is, however, expected to remain constrained as elevated interest rates continue to pose headwinds to consumer demand. The same is true for Australia, with the pace of macro recovery likely to prove more protracted than initially envisaged. Notwithstanding these external factors, we remain confident in our ability to deliveragainst our strategies and are well placed to benefit from any cyclical consumer recovery. Furthermore, we have a robust balance sheet, are highly cash generative, and are leveraging our strengthened foundations to optimise our existing businesses and invest in new sources and avenues of growth. *Any reference to future financial performance included in this announcement has not been reviewed or reported on by the Group’s external auditors and does not constitute an earnings forecast.
// ENDS //
For media enquiries contact:
WHL Press Office
+27 82 782 3856
pressoffice@woolworths.co.za
NOTES TO EDITORS:
Woolworths Holdings Limited (WHL) is listed on the JSE Limited Securities Exchange (JSE) with operations across the southern hemisphere. The Group’s vision is to be one of the world’s most responsible retailers, which reflects the organisation’s passionate commitment to doing good business for our customers, our people and our planet. See more information here.
The Group consists of two major operating divisions:
Sustainability is core to our business and is put into action through our Good Business Journey programme which enables a consistent approach to managing sustainability issues across the Group. The programme focuses on eight focus areas: people, social development, health and wellness, sustainable farming, ethical sourcing, packaging and waste, water and energy and climate change. See more information here.
Woolworths Financial Services (WFS) is a joint venture between Woolworths and Absa Group Limited, with Absa Group Limited owning 50% + 1 share.
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