Posh Woolies’ delicious results

WOOLWORTHS’ high-flying results this week underscore the fact that retailers at the top end of the market are thriving while those at the bottom end are struggling.

At a time when consumers are battling, Woolworths’ turnover grew 23.2% to R35.4-billion, its gross profit margin improved to 46.4%, and its return-on-equity hit 49.7% — the highest in the company’s history.

Investors loved it. This week, the share price climbed 13.9% to R68.21 — adding R7.05-billion to market value.

Though this made the shares seem quite expensive, analysts still believe it is a “buy”,

Brokerage Vestact, for example, said the stock was not expensive relative to its record of growing earnings, even though there was a more muted outlook for the future.

“It is well managed, the ship has been turned in the right direction, the fashion mix is finally right and recent acquisitions have paid off.”

This appears to be testimony to the good work of CEO Ian Moir, who said this week the company wants to expand its influence among black consumers, as well as younger shoppers.

While other retailers are trying to figure out how to make it through the next six months, Woolworths is thinking much bigger.

It has its eye on becoming one of the top clothing retailers in the southern hemisphere, and wants to build a big top-of-mind food business locally over the next few years.

Though many shoppers believe that Woolworths’ food is more expensive than that of its rivals, the company has highlighted 180 “sought-after” items which it says are competitively priced.

This has helped Woolworths Food expand its market share for every month since September 2011. For the year to June, for example, food sales rose 15.4% — well ahead of market growth of 7.1%.

Its Country Road clothing brand had a “great year”. The acquisition turned out better than it hoped, “and we hoped quite a lot from it”, said Moir.

Next year in March it will introduce Witchery and Mimco into 15 stores.

The group has reduced underperforming stores from 6.6% to 3.7% of space.

Though its outlook is slowing for lower and middle-income consumers, it continues to expect resilience from the upper end.