South African upmarket fashion and food retailer Woolworths has forecast a decline of up to 32% in full-year total headline earnings due to weak sales, as higher living costs continue to impact discretionary spending.
On Wednesday, Woolworths announced that headline earnings per share (HEPS) for total operations are expected to decrease by 27% to 32% for the 53 weeks ending June 30, compared to 514.7 cents in the previous year. When excluding the prior year’s contribution from Australian department store David Jones, which was sold, and adjusting for a comparable prior 52-week period, HEPS is projected to fall by 14% to 19%.
The retailer also plans to record a non-cash impairment of goodwill on its Australian men’s fashion brand, Politix, after reassessing the brand’s carrying value. This impairment will affect the EPS line but not HEPS.
Group turnover and concession sales for the total group dropped by 16.4%, though its South African Fashion, Beauty, and Home business saw a turnover growth of 1.4%. The food business experienced an 11.2% sales increase, bolstered by the acquisition of Absolute Pets in the fourth quarter. On a comparable basis and from continuing operations, group turnover grew by 6.2%, or 5.6% on a constant currency basis.
Woolworths’ fashion business suffered due to the weak macroeconomic environment, poor product availability caused by port congestion, and increased competition from international online retailers. The late arrival of cold weather also delayed winter clothing purchases.
Fast-fashion online retailers Shein and Temu have aggressively expanded globally, including in South Africa, attracting local shoppers with low-priced items like $5 tops and $10 dresses.
In Australia and New Zealand, retail trading conditions worsened in the second half of the year, with consumer sentiment at near-record lows and the ongoing cost of living crisis affecting both footfall and discretionary spending. Consequently, sales at Woolworths’ fashion brand Country Road fell by 6.8%.by 6.8%.
Source: CNBC
