RECEIVING a boost from its Australian operations, Woolworths Holdings on Wednesday reported an 18% increase in group sales for the 26 weeks to December 23, the first half of its financial year which ends in June.
The upmarket retailer said sales in comparable stores — stores open for more than a year — grew by 9.4%.
Absa Investments analyst Chris Gilmour said Woolworths’ trading update was "without a shadow of doubt the best we’ve seen so far", in an environment most retailers see as challenging.
Rivals Shoprite, on Monday, and Massmart, last week, released disappointing sales updates.
Woolworths said in Wednesday’s statement that its general merchandise sales grew 7.7% overall, or 4% excluding new stores. Food sales rose 11.1%, or 7.8% excluding new stores. It said its inflation of food prices over the 26 weeks was 7.4%.
Mr Gilmour said: "A big chunk of that overall sales growth of 18% must be due to Australia — you have three months of Witchery coming in. Nominal sales growth with both food and clothing wasn’t spectacular, it was okay."
Woolworths has taken steps to shorten its merchandise cycle‚ therefore lifting performance of its clothing division. Clothing sales in South Africa inched up 13% against a price increase of 5.5%. Sales in comparable stores grew 7.7%.
"The fact that they got 13% growth in clothing — that’s not bad, it’s actually quite good. I think they’ve been progressively fixing up the clothing side for quite some time now," Mr Gilmour said.
But it was the group’s Australian business that turned out to be a boon. Sales in Australia and New Zealand rose 55.6%, in Australian dollar terms.
The sales of Witchery and Mimco — which Country Road‚ Woolworths’ 88%-owned subsidiary, bought for A$172m (R1.5bn) — are included from September 29 last year.
Sales in comparable stores increased 10.7% and net space, excluding the acquisition, contracted 2%, the group said.
"Comparable store sales improved in South African clothing and Australia, although food and general merchandise were a little weaker, which are typically the more cyclical parts of the business relative to clothing," Stanlib retail analyst Theresa Heath said.
The Woolworths Financial Services debtors book grew 12% which, according to Ms Heath, suggests "quite an acceleration" in growth in the last six weeks of the year, "which was encouraging, as the Woolworths and Absa joint venture has been the relative retail laggard in driving credit growth". She said it " remains a very high quality book, with an annualised impairment rate of only 1.5%".
Woolworths said it expected that both earnings per share and headline earnings per share for the 26 weeks to December 23 would be 18%-24% higher than for the same period in the previous year. The group’s interim results are scheduled to be announced on or about February 14.
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