A WEE DRAM
CHRIS GILMOUR: If Woolies is trapped in economy’s pincer, then all other retailers are likely to struggle
‘Woolies is a world-class business and if it were operating in the developed world, it would be pumping’
The eagerly awaited unveiling of Finance Minister Malusi Gigaba’s action plan finally took place. To refer to it as disappointing is a grave understatement. His strategy will probably do little, if anything, to allay the concerns of the ratings agencies.
Gigaba concentrated on timelines to which he can theoretically be held to account, but absolutely nothing new emerged that could conceivably change the dismal course of the South African economy. The consumer economy is cooling rapidly and urgently needs a kick-start if we are to avoid a prolonged recession. Particularly unacceptable was his assertion that "there is no growth target for this action plan".
How fitting, then, that Woolworths released its trading statement for the year to June 2017 on the same day as Gigaba’s announcement. Woolies is a world-class business and if it were operating in the developed world, it would be pumping. But it’s not. This was a poor update, in similar vein to its pedestrian performance during the interim period to December 2016.In SA, after stripping out the effect of new store space and inflation, real comparable clothing and general merchandise sales went backwards significantly. At least management didn’t blame the weather this time. Comparable food sales, which for years have been the mainstay of Woolies, rose 4.6% but food inflation averaged a whopping 8.4%, meaning that, in inflation-adjusted terms, even food sales declined. In Australia, even though David Jones and Country Road eked out some marginal market share gains, the brands went backwards in terms of comparable sales growth. Full-year headline earnings per share growth, which excludes...
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