Woolworths records ‘pleasing’ sales, beats expectations

RETAILER Woolworths said on Thursday that sales increased 15.9% for the 20 weeks to November 11, compared with the same period a year ago.

Food sales advanced 11.2%, while clothing sales in South Africa gained 13.7% and general merchandise grew 11.5%, the Cape Town-based group said.

Avior Research analyst Michael Mcleod said the update was “very positive”.

“Looking at their top-line growth, it was a bit ahead of our expectations. Clothing at 13.7% is very good,” he said.

Woolworths‚ which until recently had been losing market share in its clothing business‚ had taken steps to shorten its merchandise cycle, therefore lifting performance in this division.

“We’ve reduced the length of time it takes from design through to store delivery. We’re injecting newness every two weeks. The things we needed to fix‚ we fixed‚” Woolworths CEO Ian Moir said in August.

Sales in Australia and New Zealand increased 36.9%, boosted by its purchase of the Witchery Group from September 30.

“They’ve been struggling in Australia and it’s quite good to see that while excluding acquisition space, they have actually contracted, which means they are focusing on the stores that are profitable rather than on just keeping on expanding,” Mr Mcleod said.

Country Road‚ Woolworths’s 88%-owned subsidiary, concluded the acquisition of 40-year-old fashion retailer Witchery Group from Gresham Private Equity for A$172m (about R1.5bn) in October.

The Witchery Group consists of two brands‚ Witchery and Mimco.

Woolworths said retail space, including stores in the rest of Africa, for the 20-week period grew by 5.2%.

“They have actually expanded relatively fast for the first 20 weeks because they originally anticipated 5.4% space growth for the full year. It could highlight that they will be able to beat those original targets of space growth,” Mr Mcleod said.

Vestact director Sasha Naryshkine said Woolworths’s update was “very pleasing,” in what most retailers continue to call a challenging environment.

“No real stress on the debtors book, I think that is a real relief for those getting anxious about the unsecured credit sector,” he said.

The Woolworths Financial Services debtors book reflected year-on-year growth of 10.9% at the end of October, with the impairment rate for the four months to October at 1.8%.


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