Woolworths bulk buy

Woolies continues to impress

Woolworths is enticing new customers into its stores by introducing larger varieties of product categories and bulk value buys in its stores, meaning the battle for the trolley between the upmarket retailer and rival Pick n Pay is getting fiercer.

Woolworths last week reported a 21% rise in profit for the 26 weeks ended December 23, as its core high-income customers continued to snap up goods.

The retailer has already made strides in its strategy of converting basket shoppers to trolley shoppers. It has wooed its well-heeled customers into buying more than just meat and fresh produce from its stores by taking its pack sizes up and offering bulk and new brands at competitive prices.

“What we need to do is to get more customers to experience the new Woolies. We will be more aggressive in our marketing and communication than we’ve been,” CEO Ian Moir said.

Woolworths’ salvo comes at a time when Pick n Pay’s turnaround strategy is still in its infancy. “In the foods business, we’ve taken market share from Pick n Pay. I think they’ve been clear that they have issues ; they have a lot to sort out. As they do, we and others have taken market share,” Moir said.

Absa Investments analyst Chris Gilmour said: “Like Shoprite, Woolworths have a huge dedication to centralised distribution, which means they can actually exploit their efficiencies.”

Woolworths reported an increase in headline earnings per share of 21% to 164.2c in the six months to end-December compared with 135.7c a year earlier. Sales in comparable stores grew by 9.4%.

Independent Securities CEO Simon Fillmore said the results were “pretty phenomenal”.

“In terms of all the tick boxes, they look exceptionally good. Nice growth, very good cash generation, exceptional return on equity from the business, improvements across all the divisions and in gross and net operating margins for the business ,” he said.

The group’s Australian business, Country Road, turned out to be a boon, as sales of Witchery and Mimco — which Woolworths’ 88%-owned subsidiary Country Road bought for A$172m (R1.5bn) — were included from September 29 last year. Sales in Australasia rose 55.6%‚ in Australian dollars.

Gilmour said the group’s numbers were “outstanding”. “Their return on equity, which is at 58%, is going up and weighted average cost of capital going down. That is what American investors particularly like ; they go for that big gap between the two. This is … going to appeal to the foreign investors,” he said.

Woolworths’ food sales grew 11.1%. Its clothing and general merchandise sales grew 11.4%. Clothing sales in South Africa rose 13%.

Source: Business Day