Fri, 03 Apr 2020

Retailer Woolworths has announced a 12.3% fall in adjusted profit before tax for the 26 weeks ended December 29 due to a constrained economic environment in SA, depressed clothing sales and power outages.

In a trading update on Thursday, the JSE-listed retail company said its interim dividend would be cut by 3.3% to 89 cents per share. The results do not take into account accounting changes.

Operating profit in the group's Fashion, Beauty and Home division shrank by 8.9% to R834 million, with an operating margin of 11.5%.

"Our Black Friday performance was disappointing due to under-participation. Womenswear underperformed as a result of some product failure, a lack of newness in summer and higher price points, which also impacted sales and volumes," it said in an update to shareholders.

Woolworths Food grew operating profit by 8.0% to R1.16bn, with an operating margin of 6.9%. The retailer said turnover and concession sales in the food division increase by 8.1% and it continued to grow market share.

Australian sales, meanwhile, were put under pressure due to a decrease in footfall caused by bushfires and muted consumer spending.

Operating profit at David Jones declined to A$20 million, with an operating margin of 1.7%.

Operating profit at the Country Road Group decreased by 8.2% to A$56 million, with an operating margin of 10.4%. Woolworths said that Country Road sales increased by 3.3% when excluding the impact of the exit from the Australian department store chain Myer. The retailer announced the exit in 2019, saying that while there would likely be a "short-term impact on profit, the extra margin and better customer experience we can give will be positive for both the business and our customers in the long run."

The retailer said the coronavirus outbreak in China is expected to impact on sourcing across the group. "The group is currently actively considering ways to mitigate the risks associated with the coronavirus, it said.

Woolworths said that, as the contribution from online sales increases, the reduction of unproductive space remains a priority in David Jones and the Country Road Group.

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