Retail in need of therapy
Inside the rot at Woolworths
With even the darling of the retail sector now showing weakness, prospects for trading this year look bleak
A war to capture the dwindling spending power of SA consumers is raging in the retail sector, with promotions and aggressive pricing the weapons of choice. In the clothing segment it’s especially fierce. Of Woolworths’ bid to defend its turf, Evan Walker of 36One Asset Management says: "In the run-up to Christmas, Woolworths had the biggest promotions drive I have seen in over a decade. Prices were slashed by 30%-40%." The price cutting by the retailer, headed by Ian Moir, was even more dramatic in some instances. As an example, the price of a line of men’s shirts in the Sandton City store was cut from R499 to R80, says Alec Abraham of Sasfin Securities. Even this slashing of prices, though, was not enough to stop the rot. In a trading update for the 26 weeks to December 25 Woolworths reported clothing sales volume down 3.8% after adjustment for 7.3% internal inflation. On a like-for-like (same store) basis, sales volume was down 6.1%, barely bettering the 6.2% fall in the 19 weeks...