Woolworths to return to profit
Lower inflation helped the retailer sell more food, but its clothing division had a bad winter
Woolworths will return to profit in the first half of its 2019 financial year following the loss caused by its R7bn impairment of Australian department store chain David Jones in the matching period.
The retailer said in a sales update for the 20 weeks to November 11 that it expected its interim earnings per share (EPS) to recover from the 505.9c loss it reported for the first half of its 2018 financial year.
Woolworths said in Thursday’s sales update that it would issue a trading statement for the 26 weeks to December 23, giving more precise guidance on its interim earnings once it obtains reasonable certainty.
The group’s overall sales in the first 20 weeks of its 2019 financial year grew 2.7% from the matching period, a slight improvement on the 2.6% growth it reported in its sales update a year ago.
Measured in “constant currency” — keeping the contributions from Australian subsidiaries David Jones and Country Road in Australian dollars rather than converting to rand — sales grew 3.6%.
David Jones grew sales by 2.9% after suffering a 5.3% sales decline in the first 20 weeks of the previous financial year. The sales update did not make it clear if this was measured in rand or Australian dollars.
Country Road grew sales 3.4%, a slowdown from the 8.3% reported in the sales update Woolworths issued in November 2017.
In its South African operations, Woolworths’ food division grew sales 7.2% — a slowdown from 9.3% a year ago — while its “fashion, beauty and home” division suffered a 3.3% decline in sales after managing 0.7% growth in the first 20 weeks of the previous financial year.
“While sales for the first quarter ended September 23 were affected by a significantly smaller winter sale, regular sales in October, particularly in womenswear, have shown a positive trend,” the sales update said.
Taking food inflation into account, which slowed to 1% from 4.5% in the matching period, Woolworths’ food division beat the previous year.
The trading statement said this was thanks to “volume growth driven by low inflation and higher levels of promotion”.