Group sharpens its strategic focus around its market-leading premium Food business
HIGHLIGHTS
Commenting on the results, WHL Group CEO, Sam Ngumeni, said: “This was a tough year across our markets, with heightened economic pressure and weaker consumer demand. While our results reflect the resilience of our portfolio and the strength of Woolworths Food, it is not where we want to be. We are clear on the opportunities and the actions required to unlock greater value, and we are moving decisively to improve performance across the Group. We have already made progress, and that stands us in good stead for the year ahead.”
GROUP PERFORMANCE
Group turnover and concession sales increased by 4.3% to R84.5 billion, and by 4.8% on a constant currency basis, with every segment recording positive sales performance for the full year. Following a good first half, the war in the Middle East drove higher fuel prices and inflation, weighing on consumer confidence and demand while adding to operating costs. The resumption of interest rate increases in both South Africa and Australia further constrained household spending, with consumers placing greater emphasis on promotions and essential purchases.
The Group responded with a sharpened focus on working capital, cash generation and cost control across every business, and with a broader reset, all demonstrating progress in the positioning and reset of Woolworths on its journey to a brilliant future.
Adjusted Earnings Before Interest and Tax (‘aEBIT’) and Adjusted Earnings Before Interest, Tax, Depreciation and Amortisation (‘aEBITDA’) both grew by 2.8% to R5.3 billion and R8.9 billion, respectively. Headline EPS increased by 5.3% to 282.3cps and adjusted diluted Headline EPS by 3.7% to 314.7cps.
The Group’s focus on cash generation delivered a marked improvement in the working capital position, with cash conversion rising to 104.5% from 82.5% in the prior period. Return on Capital Employed improved to 17.0% and remains well above the cost of capital of 11.2%. The Group has declared a final dividend of 81.0 cents per share, taking the total dividend to 199.0 cents per share, an increase of 5.9%, on a payout ratio of 70% of headline earnings.
WOOLWORTHS
Woolworths South Africa delivered a solid result in the face of a materially tougher second half. Turnover and concession sales grew by 5.4% for the full year and by 4.1% in the second half, with particular weakness in the fourth quarter reflecting a strong comparative base, softer consumer demand and disruptions to trade. This impact was more pronounced in Fashion, Beauty and Home.
WOOLWORTHS FOOD
Woolworths Food once again delivered above-market performance, reinforcing its position as South Africa’s most trusted food retailer and the Group’s primary engine of value creation. Turnover and concession sales grew by 5.7% for the year, with growth of 3.7% on a comparable-store basis, supported by the quality and innovation of the offering and a continued focus on an elevated in-store customer experience. Price movement averaged 4.7% for the period, and 3.9% excluding meat.
On-demand delivery achieved revenue growth of 19.6% for the period, with online sales now contributing 7.3% of SA Food sales.
Gross profit margin was maintained at 24.9%, delivered through operational efficiencies and achieved notwithstanding higher distribution costs from inflated fuel prices, the investment in the Midrand distribution centre, and the dilutionary impact of a growing online channel. aEBITDA of R5 billion increased by 6.1%, pleasingly ahead of topline growth, whilst aEBIT grew by 3.2% to R3.7 billion, delivering an aEBIT margin of 6.7%.
WOOLWORTHS FASHION, BEAUTY AND HOME (‘FBH’)
In Fashion, Beauty and Home, turnover and concession sales increased by 4.4% for the period, with comparable store sales up 4%. Trading momentum accelerated through the first half before the war in the Middle East had a pronounced impact on demand, particularly in the fourth quarter, slowing second-half growth to 2.6%. Price movement averaged 2.4% over the period, with Fashion inflation of 0.9%.
Our Home business delivered strong growth of 11.7%, supported by an enhanced Homeware offering, while Beauty grew by 7.9% despite increased competition in the category, reaffirming Woolworths as the Beauty shopping destination in South Africa. Online sales contributed 6.3% of SA FBH sales. As part of the Group’s reset to reorientate around its Food business, Home and Beauty are categories that translate most readily into commercial momentum as an extension of Food into a broader lifestyle proposition.
Price investment in Kidswear, additional promotional activity, and the clearance of excess inventory following the weaker fourth quarter, placed significant pressure on the FBH gross profit margin in the second half, with the full-year margin declining by 130bps to 46%. The ongoing focus on optimising space and efficiency reduced net trading space by 0.7%. aEBITDA declined by 5.5% to R2.4 billion and aEBIT by 14.1% to R1.4 billion. The excess inventory has been deliberately addressed, and FBH enters the new financial year with a materially cleaner inventory position from which to rebuild margin.
WOOLWORTHS FINANCIAL SERVICES (‘WFS’)
Woolworths Financial Services delivered a solid result, with the book growing by 5.6% year on year to the end of June 2026 while discipline ensured quality book growth. The deteriorating macroeconomic environment in the second half resulted in higher impairment coverage, with the annualised impairment rate for the year increasing to 7% from 6.1% in the prior period. The contribution of WFS to Woolworths was a profit after tax of R228 million, an increase of 5.6%.
COUNTRY ROAD GROUP (‘CRG’)
The apparel retail sector in Australia and New Zealand began to stabilise in the first half of the financial year, before rising interest rates and the ensuing war in the Middle East placed consumer sentiment, footfall and spend under significant pressure. The sector remains intensely promotional as retailers reduce excess inventory. Within this context, CRG sales increased by 1% for the period and by 1.6% on a comparable-store basis. The Country Road brand traded marginally ahead of last year, whilst Witchery and Politix were well up on the prior period, benefiting from the repositioning of their respective brands.
A deliberate focus on improving the quality of sales, through greater full-price sales and reduced discounting, lifted the full-year gross profit margin by 130bps to 57.7%, an encouraging outcome in an intensely competitive and highly promotional trading environment. Coupled with the reduced cost of doing business from the reset operating model, which held expenses marginally below the prior year, this saw CRG pleasingly return to full-year profitability, with aEBIT of A$2.3 million.
OUTLOOK
Looking ahead, the situation in the Middle East remains unpredictable. While fuel prices and inflation appear to have moderated from peak levels, consumer confidence and spending are expected to stay under pressure across both geographies for the foreseeable future.
The Group is positioning Woolworths for a brilliant future. This means reorienting around its market-leading premium Food business – its strongest competitive advantage and primary engine of both brand equity and value creation. Carefully selected adjacent categories will strengthen the customer proposition and the Group’s own ecosystem.
The operating model and composition of the Executive Committee have been reset to strengthen execution and accountability, and a strategic review is under way to ensure that every part of the portfolio has a clear role, a credible path to improved returns, and the appropriate level of investment. While any reset takes time, the Group has clarity on what will drive future performance and is acting decisively to make the changes required.
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