Headwinds hinder Woolies
STRUGGLE CONTINUES: SOUTH AFRICAN AND AUSTRALIAN ECONOMIES TO REMAIN TOUGH
Woolworths is optimistic its continued investments in David Jones will start paying off.
Although Woolworths saw its clothing and beauty sales fall in the year to end-June, management still patted itself on the back. “It’s a really good set of results,” says CEO Ian Moir. “We took market share in tough conditions.”
This was despite its fashion, beauty and home division seeing profit fall 1.1% to R1.68 billion. This division plunged 21% to R1.7 billion in the corresponding prior period. The recovery is even more remarkable measured against its performance in the first half of 2019, which saw this division’s sales fall 11.8%.
Even so, Moir doesn’t see the
economy coming to the group’s aid anytime soon, with sluggish trading expected to persist in SA and Australia. Uncertainty about the government’s plan to boost SA’s economy and Australia’s slowing housing market has dampened spending.
David Jones
The difficulty at its David Jones chain in Australia saw Woolworths reduce the value of this asset by Au$437.4 million (R4.5 billion) this year, after it wrote off Au$712.5 million (R6 927 million) the previous year.
Woolworths bought David Jones for R21.5 billion in 2014 as part of a plan to turn Woolies into a global retail player. Instead, problems in Australia led to it incurring a loss last year.
Tough trading conditions and the lengthy redevelopment of its flagship store saw David Jones’s sales collapse from R660 million to R378 million in the year to June. The redevelopment of David Jones’s flagship Elizabeth Street store in Sydney will be completed next year. This is part of several initiatives aimed at improving David Jones’s performance.
Although a tough year for Woolies, its local food operation has strengthened, with operating profit up 5.4% to R2.28 billion. Massmart and Shoprite have also found the going tough. Massmart saw trading profit collapse from R664.4 million to R318.9 million for the first half to end-June. Shoprite’s trading profit for SA operations fell 9.1% to R6.55 billion for the year to end-June.