Woolworths. Picture: JAMES OATWAY
Woolworths. Picture: JAMES OATWAY

SA RETAILER Woolworths will aim to conserve cash as growth slows in its home market, chief executive Ian Moir said on Thursday.

Shares in the Woolworths slid to a two-month low despite posting a 30.6% jump in first-half profit.

Woolworths, which makes nearly 60% of its sales in SA, warned rising interest rates would further pressure South African consumers.

"It would be more conservative, in what is a volatile environment, to offer scrip rather than cash," said Mr Moir, referring to dividends paid in shares rather than cash.

Shareholders will have a choice between a scrip and a cash dividend, the company said.

If all shareholders chose scrip, Woolworths would have R1.5bn to R1.6bn more for investment and to pay off debt, Mr Moir said.

The company is committing capital to its expansion plans in Australia, where it last year bought department store chain David Jones.

South Africa’s retailers are battling to boost sales as consumers check spending, though Woolworths has done better than rivals due to its appeal to high-income customers.

But a severe drought in southern Africa and the weaker rand is expected to stoke food price inflation, and though higher maize prices should not have a direct impact on higher income shoppers, their spending could sag.

"When we see food inflation coming through, our customers, even at the upper end, tend to buy less items," said Mr Moir.

Sasfin Securities analyst Alec Abraham said though Woolworths posted good operational results, Mr Moir’s downbeat comments on South Africa’s growth outlook might have contributed to the share price fall on Thursday.

Earnings per share were affected by costs to acquire David Jones and the dilutive effects of share issues to finance the transaction and a black empowerment deal.

Headline earnings per share, the most widely watched profit measure in South Africa, which strips out certain one-off items, were up 30.6% at 253.5c for the six months ended December 31.

Shares in Woolworths were down 7.5% at R86.37 by 10.50am GMT, compared with a 2.1% slide in the JSE’s benchmark Top-40 index.