Woolies bedeviled by declining sales

Woolworths Source: Google Images

As Woolworths tries to recover from the impairments of A$712.5 million (R7.02 billion) it suffered last year in its Australian subsidiary David Jones, the retailer continued to experience declining sales in the 26 weeks to end December trading period in South Africa.

In South Africa, Woolworths Fashion, Beauty and Home (FBH) sales slid by 2 percent, while comparable stores were 2.4 percent lower during the period, impacted by a significantly smaller winter clearance sale in the first quarter. However, the group said sales in the second quarter of the year had shown positive growth.

“Price movement was 1.7 percent for FBH and 0.8 percent for Fashion,” the group said in a trading update yesterday. It added that net retail space grew by 0.6 percent.

David Jones managed to report a marginal sales growth, up by 1 percent, but the sales performance weakened in line with the rest of the retail market in the final weeks leading up to Christmas.

“Comparable store sales grew by 0.9 percent, with growth from new stores largely offset by sales disruption from the Elizabeth Street store refurbishment,” the group said.

David Jones net retail space grew by 2.7 percent, with further net space reductions to improve the productivity of the store portfolio planned.

Woolworths acquired David Jones for A$2.1bn in 2014.

With the impairment of David Jones put in the past, the group expects its earnings per share (Eps) for the period to increase by more than 100 percent. It expects its Eps to be between 192.6 cents a share and 202.4c, improving on last year’s loss a share of  505.9c.

The group informed the market in November that Eps was significantly impacted by the impairment of the carrying value of the David Jones assets in the prior period.

Its online sales recorded an impressive 46.1 percent growth and now contributes 7.7 percent of total sales.

The group’s share price traded on the negative territory for the better part of yesterday as it was down by 9.21 percent to R49.86 a share, down from Wednesday’s closing price of R54.92.

Woolworths managed to report a 1.9 percent increase in group sales which were up by 2.7 percent in constant currency basis.

However, the group said sales growth was impacted by one day less of pre-Christmas trade, compared to last year.

Woolworths Food reported sales growth of 6.3 percent, with volume growth driven by low inflation, higher levels of promotions and price investment. Comparable store sales increased by 4.2 percent, with net retail space growth of 1.4 percent.

Another Australian subsidiary, Country Road Country, reported an increase of 2.3 percent in sales and these were up by 0.5 percent in comparable stores. Its online sales grew by 20 percent during the period, but net retail space contracted by 1.7 percent.



Source: BusinessReport