Retailer Woolworths’ shares slid nearly 6% after it released a trading update for the 20 weeks ended November 12, 2023 that showed its food and fashion units taking strain amid a moribund economy, however, it grew its online sales.
The shares hit an intraday low of R68.70 after the update.
Its turnover and concession sales from continuing operations for the 20 weeks ended November 12, 2023, excluding David Jones that was disposed of in the prior period, increased by 4.7% and by 3.9% in constant currency terms.
It said sales growth for the current period should also be considered in the context of the high prior-year base in which group sales grew by 13.4%, driven in part by post-Covid pent-up demand in Australia.
Group turnover and concession sales on a total basis, including the contribution of David Jones in the prior period, which was therefore non-comparable, decreased by 22.4% on the prior period.
Its food business saw turnover and concession sales grow by 8.4% and by 7.2% on a comparable store basis, but underlying product inflation averaged 9.4%, which was lower than headline food inflation. Space grew by 2.7% over the prior period.
Woolworths also noted that avian flu reduced the availability of key food categories, such as eggs and poultry.
On a brighter note, its food online sales increased by 46.2%, contributing 5.0% of South African sales driven primarily by increased penetration through Woolies Dash- its on-demand offering.
Sales in the Fashion Beauty and Home business was impacted by the late arrival of certain summer ranges due to congestion at the ports. Turnover and concession sales grew by 1.4%, with comparable store sales in line with last year.
This saw net trading space reduced by 0.2% relative to the prior period.
“Our teams remain focused on improving the underlying operational and financial health of the business, including growing full price sales, which has positively impacted price movement of 11.7%,” it said.
However, its Fashion Beauty and Home business online sales grew by 23.0% and contributed to 5.2% of South African sales.
The retailer pointed to numerous headwinds it faced.
It said it was trading against an increasingly challenging macro-economic backdrop, given the sustained effect of interest rate increases and higher living costs, which were negatively impacting footfall and discretionary spend in both geographies.
In South Africa, its business operations were further disrupted by a number of external factors, including the Western Cape taxi strike, congestion at the ports, and the impact of avian flu on the availability of key product lines.
“Notwithstanding the challenging macro context, our teams remain focused on profitably trading our businesses, supported by robust trade plans as we approach the key festive season. We are confident in our strategies, and continue to invest in our existing businesses as well as new growth opportunities, enabled by our strong balance sheet,” it said.
Woolworths said the economic environment in South Africa remained weak, exacerbated by the country's energy crisis, which continued to have a pronounced impact on both business and consumer confidence.
“However, our unwavering commitment to quality, the ongoing investment into our value proposition, and our intensified focus on execution, has further strengthened the trust customers place in our brand,” it said.
Meanwhile, the Woolworths Financial Services book reflected a year-on-year increase of 10.7% to the end of October 2023, driven by growth in new accounts and credit card advances. The annualised impairment rate for the four months ended October 31, 2023 was 7.5%, compared to 6.2% in the prior period.
While this reflected the strain that consumers were under in the current macro-economic environment, it was reduced from the peak of the last quarter of the previous financial year, it said.
BUSINESS REPORT