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Thursday, December 12, 2024

Woolworths reports strong sales growth as consumer sentiment improves

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Woolworths Holdings has announced a promising uptick in sales and turnover for the 18 weeks leading up to November 3, recording growth of 6.5% and 6.8% respectively compared to the same period last year.

This positive trend was observed across Woolworths’ segments, including food, fashion, beauty, and home, demonstrating a measure of resilience amidst the ongoing economic challenges facing consumers.

For the grocer’s South Africa market, there was however constrained discretionary spending by consumers although “consumer sentiment is improving, supported by moderating inflation, the start of easing interest rates, and the prolonged suspension” of load shedding.

Woolworths also said the sustained effect of high interest rates and elevated living costs continued to weigh on both retail footfall and spending for the company’s operations in Australia.

Despite the constrained consumer discretionary spending power, Woolworths’ food business delivered market-leading turnover and concession sales growth of 12.1% and 7.3% for the period under review against the prior year contrasting period.

This exhibited “strength and resilience” as well as trust in the company’s retail offerings, it said.

Shares in Woolworths traded 4.54% higher at R67.74 in afternoon trade on the JSE yesterday.

“This (higher turnover and sales) was driven by positive underlying volume growth on improved availability, ongoing innovation, and our enhanced overall value proposition,” said the company.

Woolworths has also acquired privately-owned pet retailer Absolute Pets from Sanlam Private Equity and Absolute Pets management. Excluding that acquisition, Woolworths’ raised food sales for the period by 9.6%, under which price inflation averaged 6.2%.

Online food sales for the period under review went up by 36.9%, contributing 6.2% of food sales for the category as the company’s on-demand offering, Woolies Dash also yielded a sales growth of 54.4%.

The fashion, beauty and home segment of Woolies also accelerated turnover and ales by 3.5% and by 2.8% respectively.

“The first 18 weeks of sales include the fashion winter clearance, which constitutes a high proportion of the trade for the period, and resulted in a price movement of 1.9%, with fashion at a deflation of 0.3%. Beauty delivered accelerating sales momentum, growing by 20.6%, as we increasingly establish ourselves as the beauty destination in South Africa,” it said.

The company has, however, had to rationalise unproductive space, with its net trading space resultantly decreasing by 1.8% relative to the prior period. Nonetheless, online sales for the fashion, beauty and home segment of Woolworths grew by 36.5% and contributed 6.5% to sales.

With trading conditions in Australia and New Zealand remaining challenging and leaving the retail sector faced with declining activity, sales under Woolworths’ CRG outlets fell by 8.8% over the period under review. This forced Woolworths to institute intense promotional activity, with spending patterns shifting towards value brands.

“Notwithstanding the challenging macroeconomic backdrop, the Country Road brand remains resilient, and Trenery is delivering strong topline growth, following the repositioning and re-branding of its offering,” said Woolies of its Australia and New Zealand operations.

We remain focused on improving the positioning and performance of the other brands, particularly Witchery, which are at different stages of their respective repositioning.

BUSINESS REPORT

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