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Woolies lowers outlook as disruptions in Australia, SA dent sales

RETAILER Woolworths (Woolies) yesterday flagged that its earnings for the 26 weeks to end December 26 were expected to tumble by 30 to 40 percent, with its sales dented by the prolonged lockdowns in Australia and the civil unrest that rocked South Africa in July.

Yesterday, it said its group turnover and concession sales for the 26 weeks ended December 26, 2021 decreased by 2.1 percent compared to the 26 weeks ended December 27, 2020, and by 0.3 percent in constant currency terms.

Online sales grew by 22.4 percent, contributing 13.7 percent to the group’s total turnover and concession sales for the period.

“Sales in the last six weeks of the period increased by 3 percent, and by 3.5 percent in constant currency terms,” it said.

According to the retailer, trading momentum across all divisions, except Fashion Beauty Home (FBH), improved over the past six weeks. The increase was aided by Black Friday promotions, positive festive season trade, and the lifting of lockdown restrictions in Australia.

“Due to the above-mentioned factors, the trading results for the current period are not directly comparable to that of the prior period,” the company said.

In South Africa, the Woolworths Food business grew turnover and concession sales by 3.8 percent for the half-year, accelerating its momentum to 5.8 percent in the past six weeks of the period.

“Sales in comparable stores grew by 2.8 percent, with the price movement of 2.6 percent and underlying product inflation of 3.7 percent,” Woolworths said.

It said the sales growth should be considered in the context of the high Covid-19 base, which benefited from increased home consumption.

“On a two-year basis, sales have grown by a cumulative 15.2 percent, relative to the comparative 2019 period. Online sales increased by 55.8 percent, contributing 3.1 percent of South African sales, while space grew by 2.2 percent relative to the prior period,” the retailer said.

The FBH business grew turnover and concession sales by 4.2 percent and by 4.7 percent in comparable stores, with a price movement of 5.4 percent.

“Trading momentum slowed in the last six weeks of the period primarily due to Womenswear performing below expectations. Online sales grew by 19.2 percent, contributing 4.4 percent of South African sales, while the ongoing execution of space reduction initiatives reduced the footprint by 6.1 percent relative to the prior period, resulting in improved trading densities,” the retailer said.

Meanwhile, the Woolworths Financial Services netbook grew by 5.3 percent year-on-year to the end of December 2021, compared to a 7.8 percent contraction on December, 3, 2020, reflecting the recovery in consumer spend.

“The annualised impairment rate for the six months ended December 31, 2021 improved to 4.0 percent, compared to 4.1% in the prior period,” it said.

Australia and New Zealand trade was remarkably impacted by government-enforced restrictions across the region, where the company was unable to trade in stores representing 70 percent of its brick-and-mortar sales base during the lockdown period.

“The easing of restrictions and reopening of stores, coupled with pent-up consumer demand, delivered positive sales growth in the past six weeks of the period, notwithstanding the shift of Boxing Day sales into the second half of this financial year versus the first half of the prior period,” it said.

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