29 Aug 2014 Woolworths: Shining brightly in the gloom
The economy may be weak, and the consumer depressed, but Woolworths is showing little sign of it as the retailer takes market share in both food and clothing and continues its expansion drive into the rest of Africa and Australia.
In its quest to be the leading fashion retailer in the Southern Hemisphere, the past year saw Woolworths initiate the acquisition of David Jones, the oldest department store in Australia (concluded in August); buy back its franchises in Botswana, Namibia and Ghana; and introduce its new brands Witchery and Mimco into the local market.
Food is an equally important thrust and in the year to June 2014 the group invested R1.3 billion in new space, most of it into building bigger and more food stores, the fastest growth in Woolworths history.
At the same time Woolworths managed to deliver strong results. Turnover grew 14.4% to R39.7 billion and adjusted profit before tax rose 20.1% to R4.4 billion. Headline earnings per share increased by 9.0% to 365.2 cents per share and adjusted HEPS grew 17.1% to 398 cents per share.
Adjusted earnings excludes transaction costs of R182 million relating to the acquisition of David Jones and the minority interest in Country Road and the net impact of unrealised foreign exchange losses of R139 million – all stated before tax.
Return on equity, while not the highest in history, was very high at 46.7%.
The biggest division, Clothing & General Merchandise, grew adjusted profit 11.7% to R2.0 billion in a promotion-driven market.
Woolworths Food business is fast catching up, and grew profit by 14.8% to R1.3 billion, following a year of faster-than-the-market growth.
In fact Woolies Food has grown ahead of the market every month since 2011.
“My good friend Whitey says the only reason I’m growing is that we are so small,” quipped CEO Ian Moir at the results presentation. “But I’ll take that. At this rate small becomes big quickly. Whitey, we will get there.”
The group is investing heavily in bigger supermarkets, in new distribution systems and in increased promotional activity in order to drive home the point that its basic food ranges are not expensive…..
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Woolworths hopes basket shoppers turn to trollies
WOOLWORTHS is building bigger stores and more of them as it bids to woo its competitors’ grocery shoppers by offering broader ranges, branded goods and bulk.
Now, through a supermarket play, the no-longer niche retailer is tackling Pick n Pay and Checkers head-on as it aims to convert basket shoppers to trolley shoppers through bargains and promotions intended to sway shopper perception.
Woolworths’ core high-income customers are less-price sensitive. This has insulated the retailer from the constrained consumer spending environment facing its peers.
“Customers that haven’t shopped with us before are coming in because of the promotional activities we’re running mid-month and month-end,” CEO Ian Moir said on Thursday. “We’ve invested half a percent of our gross margin into taking our prices down… to make sure that in the minds of customers we represent value and they no longer see Woolies as an expensive food shop.”….