Woolworths’s core food business continues to carry the group and outperform other segments, even with the challenges it may face with the avian flu outbreak and an under-pressure consumer.
On Wednesday, the JSE-listed retailer posted a trading update for the 20 weeks that ended 12 November 2023, commenting on the “resilience” of the grocery business, which saw turnover and concession sales growing 8.4% and 7.2%, respectively.
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Food outperformed overall group performance, which (excluding the now disposed-of David Jones business) reported a 4.7% and 3.9% turnover and concession sales growth, respectively.
Group performance was seemingly let down by the Country Road and the Fashion, Beauty and Home (FBH) businesses and by external factors that slowed trade during the period, like the Western Cape taxi strike, which brought the province close to a standstill earlier this year.
“In South Africa, our 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.”
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FBH – the subject of turnaround strategies for some time now – only managed to increase turnover and concessions sales by 1.4% in the 20 weeks under review. According to the retailer, FBH was hurt by port inefficiencies, which caused a delay in getting new stock on the shelves.
“Whilst the Fashion, Beauty and Home business continues to make steady progress against its strategic priorities, sales performance in the latter part of the 20 weeks was impacted by the late arrival of certain summer ranges, arising from congestion at the port,” Woolworths said.
Further, despite the softening of tough trading conditions observed in prior periods, Woolworths’s Country Road business, which has a presence in New Zealand and Australia, posted an 8.1% drop in sales during this period. In comparison, comparable store sales declined by 10.7%.
“This should be seen in the context of a particularly high prior-period base in which sales grew by 36.2%, driven by a strong recovery post the Covid-impacted lockdowns,” Woolworths said.
“The Country Road brand continues delivering market-leading performance across key categories. We are making good progress in the expansion of our wholesale and concession offering in support of our growth agenda,” the retailer added.
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Share price
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Despite the positive turnover and sales update it posted on Wednesday, Woolworths’s share price still took a hit. The stock lost over 5% of its value during morning trade, trading at R69.05.
Stretched consumer
Like its peers, the retailer, known for servicing higher-end consumers, especially in the grocery segment, is also seeing signs of an overstretched consumer.
According to the retailer, the local Woolworths business has seen some growth in new accounts and credit card advances, which it says has contributed to the 10.7% growth of its Woolworths Financial Services (WFS) Book on a year-on-year basis to the end of October 2023.
“The annualised impairment rate for the four months ended 31 October 2023 was 7.5%, compared to 6.2% in the prior period. While this reflects the strain consumers are under in the current macroeconomic environment, it is reducing from the peak of the last quarter of the previous financial year,” the retailer said.
Jimmy Moyaha speaks to Zak Haeri of NielsenIQ about consumers’ greater preference for alcohol over food:
