Woolworths Holdings said headline earnings a share from continuing operations were expected to fall by between -14% and -19% for the year to June 30 due to investments made and the effects of the weak trading environment on its apparel businesses.
“Whilst the group has maintained its stringent focus on preserving gross profit margin and containing costs, we equally continue to invest behind our key strategic initiatives. This, coupled with the impact of a weaker trading environment, has resulted in negative operational leverage in both apparel businesses,” the group said in a trading update yesterday.
It said this was particularly prevalent in Country Road Group (CRG), which was further impacted by higher import costs due to a weaker Australian dollar, and a higher fixed cost base. Also, a reassessment of the carrying value of the Politix business in CRG resulted in an impairment of goodwill.
Excluding the goodwill impairment, earnings per share was expected to be between 15% and 20% lower than in the prior period on a 52-week comparable basis.
The trading statement generated some online commentary, with Wayne McCurrie (@WayneMcCurrie) commenting on X: “Woolies again food good rest poor. Total earnings down 30% continuing operations a little less at 15% but still negative. Far worse than market expected. Share hammered down 5%.”
Smalltalkdaily Research (@smalltalkdaily) said: “Another mixed and messy YE24 trading update from Woolworths where solid growth in food was offset by significant weakness in apparel especially Country Road in Australia & New Zealand.”
Inside Retail Australia (@InsideRetailau) said: “Country Road Group is set to restructure its fashion retail business, which is expected to result in massive staff lay-offs, ‘The Australian’ has reported.”
The group said turnover and concession sales from continuing operations for the 53 weeks to June 30 grew by 6.2% and by 5.6% on a constant currency basis, in tough trading conditions.
The results for the 53-week period was not strictly comparable to that of the 52 weeks to June 25, 2023, as the David Jones operations in Australia were disposed of in the third quarter of the 2023 year. The 2024 reporting period also included an additional week.
On a comparable 52-week period ended June 23, 2024, sales grew by 4.3%, and by 3.2% in the comparable second half of the year. Online sales grew by 13.3% and contributed 9.2% to group sales for the year.
Turnover and concession sales for the group, including the contribution of David Jones for the nine-month period in the prior year, and the additional week in the current period, decreased by 16.4% on the prior period.
In South Africa, weak consumer confidence from higher living costs and high interest rates weighed on discretionary spend throughout the period.
The Food business delivered above-market growth. Turnover and concession sales grew 11.2%, and by 9% on a comparable 52-week period.
On a comparable store basis, sales grew by 6.9%, notwithstanding the impact of taxi strikes and avian flu in the first half. Price inflation averaged 7.9%.
The Fashion, Beauty, and Home business made progress on a number of strategies, but trade was impacted by the weak macro environment, poor availability, and increased competition from the disruptive entry of international online retailers.
Its turnover and concession sales grew by only 1.4% and declined by 0.4% on a comparable 52-week period, and by 1.3% on a comparable store basis.
Retail trading conditions in Australia and New Zealand deteriorated further in the second half, with consumer sentiment at near-record lows and the prolonged cost of living crisis continuing to impact both footfall and discretionary spend.
BUSINESS REPORT