Woolies announces a cut in dividend for half-year
WOOLWORTHS (Woolies) plans to beef up its fashion beauty and home (FBH) business as it announced an unexpected dividend cut for the halfyear ended December 2019. The group yesterday declared an interim dividend of 89 cents a share, 3.3 percent lower than 71.2c a share in 2018.
“FBH will focus on improving performance through better pricing and ranges, particularly in women’s wear,” the group said.
The Cape Town-based company reported a fall in earnings a share and headline earnings a share of 9 and 10.1 percent, respectively, as its clothing business underperformed and problems continued at its troubled Australia’s department store chain David Jones.
Woolies had grappled with a constrained economic environment in South Africa, with load shedding and heavy rains in parts of the country adding insult to injury.
“Our Black Friday performance was disappointing due to under-participation. Womenswear underperformed as a result of some product failure, a lack of newness in summer and higher price points, which also impacted sales and volumes,” said the retailer.
FBH sales and comparable store sales both grew by 2.2 percent and by 0.9 percent after adjusting for the shift in trading weeks.
However, its food division remained resilient, while its online David Jones sales were a bright spot after growing by 61.8 percent and now comprised 10.4 percent of total sales. The food business’ turnover and concession sales increased by 8.1 and by 7.8 percent after adjusting for the shift in trading weeks.
Lulama Qongqo, an investment analyst at Mergence Investment Managers, said the clothing segment performance came as a major surprise, because they seemed to be recovering well in the last half of 2019.
“I think that they may have underestimated how difficult it would be to meet their clothing self help targets. They seem to be having a bit of a tough time finding the right balance between basic and fashion,” said Qonqqo, adding that the food business was solid.
“The only segment that had impressive performance was the food business as per usual, because they’ve done well in carving out a space in the South African food retail market for themselves. They performed well, notwithstanding the tough economic climate and load shedding,” said
Qongqo.
Woolworths said in terms of its Australian market, Country Road Group sales decline partly due to the decision to withdraw from the Myer stores and the deadly bush fires which ravaged parts of the country.
Woolies said it expected consumer spending in Australia to be muted in the short-term, due to stagnant wage growth and the impact of the bush fires. Woolies was concerned about the coronavirus.
It also said that the heightened levels of competition and promotional activity was expected to continue.
“David Jones is expected to benefit from the completion of the Elizabeth Street store refurbishment, with trade normalising from the fourth quarter and the Market Street rent ceasing from the 2021 financial year,” the company said.
Woolworths shares closed 4.42 percent lower at R42.40 on the JSE yesterday.