Weak group sales hurt Woolies shares on the JSE
WOOLWORTHS plummeted by 9 percent to R57.64 before recovering to close 5.5 percent lower at R59.85 on the JSE yesterday on weak group sales growth for the half year to December 2017, reflecting a constrained South African consumer and pressure in its Australian market.
The retailer, which operates subsidiaries Woolworths, David Jones, and Country Road, said group sales had increased by 2.5 percent compared to 6.7 percent in the previous year.
Food sales in South Africa were strong, while home and apparel numbers were under economic pressure. Woolworths Food soared by 9.4 percent, with comparable store sales up 5.3 percent, the company said.
Woolworths fashion, beauty and home sales were 0.2 percent lower with comparable store sales 3.4 percent weaker.
Alec Abraham, a senior equity analyst at Sasfin Wealth, said yesterday that the numbers were lower than expected. “I was expecting negative volumes in SA clothing, but the decline was even worse than I had anticipated. Food performed well.”
Weak consumer confidence on the back of the poor job market is one of the problems facing South Africa’s retailers, including Woolworths. It is also facing headwinds in Australia, where David Jones’ half-year sales were 3.8 percent lower.
Increased Country Road sales increased by 5.2 percent. Sales in comparable stores, which exclude Politix that was acquired in November 2016, declined by 1 percent.
“In Australia, Country Road’s recovery lost momentum, but the chain still appears to have outperformed its Australian peers in terms of sales growth. However, David Jones appears to be lagging department store peers,” said Abraham.
Woolworths took over Australia’s David Jones for A$2 billion (R19.54bn) in 2014 in a bid to become one of the 10 largest department store operators in the world.
Headline earnings a share are expected to be between 12.5 percent and 17.5 percent lower in the period, it said.
Earnings per share are expected to be more than 20 percent or 69 cents lower than in the previous period.
In November, Woolworths posted lower-than-expected numbers for its David Jones and South African Woolworths fashion, beauty and home division, previously called clothing and general merchandise, for the first 20 weeks of the 2018 financial year.
It blamed the low numbers on the macro environment, which it said had negatively impacted consumer sentiment and discretionary spend.
The group’s interim results for the 26-week period ended December 24, 2017, are scheduled to be announced on February 22.