Woolies profits to plummet by 20%
Woolworths yesterday reported it expects its first full-year loss in 16 years as local sales fell. Picture: Nabeelah Shaikh
JOHANNESBURG – South Africa’s largest clothing and food retailer Woolworths yesterday reported it expects its first full-year loss in 16 years as local sales fell and its Australian adventure came back to haunt the group.
Woolworths said its profits for the year would slump at least 20 percent, impacted by trading conditions in South Africa and Australia for the 52 weeks to the end of June.
It said headline earnings per share would also decline between 15 and 20 percent to 336.7 cents and 357.8c, down from 420.9c reported last year, while earnings per share were expected to ease from 160 to 170 percent – from 340c to 396.7c. The group said adjusted diluted headline earnings per share would also fall between 10 and 15 percent to between 355c and 375.9c – down from 417.7c last year. In May, the group reported an impairment charge of A$712.5 million (R6.98 billion) on the carrying value of its subsidiary, David Jones, for the 26-week period ending December 24.
It said the local Woolworths Fashion, Beauty and Home sales declined by 2.9 percent in the second half, resulting in a full year contraction of 1.5 percent, with price movement of 0.8 percent.
The group said comparable store sales were 4.1 percent lower, with net retail space growing by 2.5 percent. “The year 2018 has been a difficult year for the group, as we contended with extremely challenging trading conditions in South Africa and Australia, as well as poor product execution in some areas of womenswear,” the group said. Woolworths said sales in its local food section, however, increased 8.4 percent, achieving positive volume growth on price movement of 3.2 percent. Comparable store sales were up 4.8 percent, with net retail space growing by 3.5 percent.
The Woolworths Financial Services debtors’ book reflected positive year-on-year growth of 3.8 percent, as at the end of June
The impairment rate for the 12 months to the end of June reduced to 5.2 percent from 6.3 percent in the prior year. Its other Australian subsidiary Country Road Group (CRG) sales increased by 1.7 percent for the year. The group said online sales in CRG now represent 18 percent of sales with growth of 20.8 percent and net retail space grew by 2.5 percent. David Jones managed to grow its sales by 2.2 percent in the second half and by 2.7 percent in comparable stores. However, full-year sales still reflected a negative growth as it finished 0.9 percent lower and 0.4 percent lower in comparable stores. Its net retail space grew by 0.1 percent, with 4.2 percent new space offset by 4.1 percent of space reductions and closures
Woolworths said sales disruptions from the refurbishment of the Elizabeth Street store in Sydney would continue through to December 2019. “The disruption experienced during the year by the implementation of new inventory and online systems, the repositioning of the foods business, and the head office relocation, impacted both gross margin and costs,” the group said. Woolworths is due to release its full-year results next month. Samantha Steyn, a portfolio manager at Cannon Asset Managers said the numbers pointed to a weak second half for the group. Woolworths rose 0.53 percent on the JSE yesterday to close at R53.18.
– BUSINESS REPORT
Source: iol.co.za