Woolworths today announced strong results for the 26 weeks ended 29 December 2013, reporting a 16.0% increase in revenue and a 21.1% improvement in profit before tax.
Headline earnings rose 17.2% to 192.4 cents and the group generated a return on equity of 55.9%. The directors declared an interim cash dividend of 101.0 cents per share, up 17.4% on last year.
Commenting on the results, CEO Ian Moir said “We are pleased with these results. All segments of the business performed well but the stars were our food business and the Country Road Group in Australia. We continue to build stronger, more profitable customer relationships through our WRewards programme and our focus on the upper-end consumer segment is really paying off.”
The Clothing & General Merchandise business performed well in an increasingly promotion-led apparel environment. Woolworths’ clothing sales grew 9.7%, which was ahead of the South African apparel market. Price movement was 3.8% and good volume growth was achieved.
In the Food division, Woolworths’ supermarket strategy, aimed at capturing a greater share of their customers’ total food shop also showed success. The Food business traded strongly throughout the period, and well ahead of the market with increased promotional pricing significantly changing customer perceptions.
All four brands (Witchery, Mimco, Country Road and Trenery) in the Country Road stable performed strongly in both Australia and South Africa. With the inclusion of Witchery for the full period, sales increased 27.5% in Australian dollars. Gross margins improved significantly from 61.3% to 63.0% and profit before tax grew by 50%. Country Road is now a significant rand hedge, contributing over 20% of profits.
The Woolworths Financial Services debtors book reflected year on year growth of 13.8% The quality of the book remains strong despite the broader credit environment.
The Woolworths business in the rest of Africa continues to trade well. The company has completed negotiations for the conversion of 33 of its previously franchised stores in Botswana, Namibia, Swaziland and Ghana, which will bring focus to the sub-Saharan region and build critical mass for merchandising, store operations and supply chain.
Looking forward, Moir concluded “Although we believe economic conditions in South Africa will remain constrained, especially in the lower and middle income segments of the market where consumer debt levels remain under pressure, the upper income segment in which we operate continues to show resilience. Trading for the first six weeks of the second half of the financial year has been positive. We expect South African sales growth to be broadly in line with the first half and to remain ahead of the market in Australia.”
See www.woolworthsholdings.co.za for a video of Ian Moir announcing results for the 26 weeks ended 29 December 2014. Sound and video files can be downloaded at the same URL for radio, TV and on-line coverage.
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