Woolworths Holdings Ltd (WHL) today announced results for the 26 weeks ended 24 December 2017. Group sales for the first 26 weeks of the 2018 financial year increased by 2.5% to R38.8 billion, reflecting continued challenging trading conditions in both South Africa and Australia. Adjusted profit before tax of R3.0 billion was down 8.8% (2017: R3.27 billion).
Headline earnings per share (HEPS) and adjusted diluted HEPS, which excludes the David Jones impairment of A$712.5 million as well as last year’s A$172.6 million profit on the sale of the David Jones Market Street property, decreased by 15.0% and 8.8% respectively. Earnings per share (EPS), which includes both the impairment charge and last year’s property sale, decreased by 246.6%.
Ian Moir, WHL Group CEO, said, “A challenging market, along with some mistakes in the implementation of new systems and ranges, has had an impact on our clothing businesses both in South Africa and Australia. Food operations, however, continue to perform strongly, with market-leading growth in South Africa and positive results from the initial rollout in Australia.
“Encouragingly, we are seeing signs of recovery now, with political change in South Africa expected to lead to increased consumer confidence. In Australia, many of the transformation initiatives at David Jones are moving towards completion and the Country Road Group remains resilient and increasingly profitable in a tough market. We believe we have the right strategies in place to build on these improved conditions and make sure our businesses are uniquely positioned to reap the benefits of our investment in people and systems when the cycle turns.”
Woolworths South Africa’s overall performance was slightly ahead of last year, due to a strong result from Food and Financial Services. Woolworths Fashion, Beauty and Home was impacted by the under-performance of womenswear, while other categories performed in line with the market. Overall sales decreased by 0.2% with price movement of 0.7% and comparable store sales were 3.4% lower. Store costs were well controlled, increasing by 6.6% in total (and by 2.3% in comparable stores) and other operating costs decreased by 4.3%.
We are confident that recent changes made to design and buying structures are expected to improve the womenswear offering. Our Beauty business saw strong sales growth for the period, demonstrating our focus on transforming Beauty into a destination category through the introduction of leading international brands and a strong private label business and online offer.
Woolworths Food sales increased by a market-leading 9.4%, with comparable store sales up 5.3%. Price movement of 4.4% supported positive volume growth. We continued our focus on price competitiveness without compromising on the quality and innovation that our customers expect. Our customers have responded very positively to our focus on healthy eating, and the convenience of our offer continues to be a key differentiator.
The Woolworths Financial Services debtors book reflected year-on-year growth of 4.1%, with strong growth in the credit card portfolio. The annualised impairment rate for the six months ended 31 December 2017 reduced to 5.0% from 5.9% in the prior period.
David Jones sales for the 26 weeks were 3.3% lower on a comparable basis and 3.8% lower in total. Particularly difficult trading conditions were experienced in the first quarter, compounded by significant transformation to systems and structures through this period. Sales improved throughout the second quarter and particularly over the last 6 weeks of the period. Gross profit margin increased by 1.2% to 40.7% as a result of improved performance and reduced promotional activity in the second quarter.
Net trading space reduced by 2.2% with a 5.8% reduction in under-traded stores in line with our strategy of improving space utilisation, offset by 3 new stores opened in 2017.
We are undertaking a strategic cost review as we consolidate our Australasian operations. The Board remains committed to the ongoing transformation of David Jones and will continue to invest in the future of the business.
COUNTRY ROAD GROUP
Country Road Group sales increased by 5.2%, with contribution from Politix, and sales in comparable stores 1.0% lower. Gross profit margin improved significantly by 3.1% to 63.7% as a result of higher full-price merchandise sales and lower generic discounting, as well as from sourcing benefits. Adjusted operating profit increased by 15.7% to A$59 million.
Store costs increased by 9.1% and other operating costs were 10.5% higher than last year, mainly as a result of the inclusion of Politix. Comparable stores costs were well controlled, at 2.7%. Retail space reduced by a net 3.8%, due to space optimisation and the closure of some under-performing stores.
In line with WHL dividend policy, the Board has declared an interim cash dividend of 108.5 cents, an 18.4% decrease on the prior period
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