Woolworths shines as food business keeps delivering

Woolworths SENS statement:

Trading update 

Group sales for the 26 weeks ended 27 December 2020 (‘current period’) increased by 5.3% compared to the 26 weeks ended 29 December 2019 (‘prior period’) and declined by 0.5% in constant currency terms. This reflects improved trading momentum across all businesses over the final six weeks of the reporting period versus the 20-week update published on the Stock Exchange News Service (‘SENS’) on 19 November 2020.

Trading conditions across the Group continued to be impacted by Covid-19, with significantly reduced store footfall, particularly in larger shopping centres and CBD locations. Considered actions to stimulate trade, strengthen online capabilities, manage inventory levels and execute property sales, have resulted in positive cash flows and a continued reduction in net debt levels in both South Africa and Australia.

As published on SENS on 21 December 2020, the sale of the David Jones Elizabeth Street property, to be recognised in the second half once final approvals have been obtained, will further strengthen the Group’s balance sheet and ensure a more sustainable capital structure of our Australian entities.

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Southern Africa 

South Africa’s weak macro and consumer confidence has been exacerbated by Covid-19. The country is in the midst of a second wave of the pandemic, placing further strain on discretionary spend.

Woolworths Food remained resilient throughout the reporting period, growing sales over the last six weeks of the half by 12.0%, and delivering further market share gains. Sales over the 26-week period grew by 10.9% and by 9.4% in comparable stores, with net space growth of 0.4%. Online sales grew by 158.5%, contributing 2.2% to sales, with the expansion of the click and collect offering, and trial of an on-demand delivery service. Price movement was 7.1%, impacted by mix, while underlying product inflation averaged 4.8% over the period. Price investment across key product lines remains a strategic priority and is being well received by customers.

Woolworths Fashion, Beauty and Home (‘FBH’) continues to be affected by the constrained environment, a significant decrease in Black Friday spend across the sector, and the reduction in formalwear trade. Sales declined by 11.2% over the period, with comparable store sales 11.0% lower on a 2.4% price movement. Online sales grew by 118.8%, contributing 4.0% to South African sales. Net space reduced by 1.9%, which is in line with the focus on improving store operating efficiency.

The Woolworths Financial Services (‘WFS’) book reflected year-on-year contraction of 2.2% at the end of December 2020. The annualised impairment rate for the six months ended 31 December 2020 was 4.1%, compared to 3.3% for the prior period. The focus on customer collections and payment relief initiatives and the timing thereof reflects in the shape of the book and the impairment rate for the period.

Australia and New Zealand

In Australia, while the 12-week lockdown in the State of Victoria negatively impacted sales for the half, the easing of Covid-19 restrictions, together with the extended JobKeeper relief, our successful Black Friday and Cyber Monday campaigns, and further growth in our online sales, contributed to an improved performance in the last six weeks of the reporting period.

David Jones (‘DJ’) sales over the 26-week period declined by 8.8% and by 10.5% in comparable stores. Excluding Victorian stores, which traded significantly down on the prior period due to the extended lockdown in the State, the balance of the DJ business, including online, grew by 5.9%. Online sales increased by 55.5%, contributing 17.7% to total sales over the half.

Country Road Group (‘CRG’) delivered strong sales growth of 6.7% in the last six weeks of the period, underpinned by new product ranges, particularly in the Country Road business. Sales over the half declined by 5.2% and by 2.4% in comparable stores, negatively impacted by the lockdown in Victoria. Excluding Victorian stores, the balance of the CRG business, including online, grew by 8.2%. Online sales increased by 52.5%, and contributed 31.6% to total sales for the period.