This morning Woolies released their 26 week (six month) sales update for the period ending 23 December. As expected, the numbers were not great. High-end food can be resistant during a tough economic period but even high earners shop down when it comes to clothing.
Overall group sales increased by 1.9%. In South Africa, non-food sales declined by 2% whilst food increased by 6.3%. What was quite encouraging was that food inflation was only up 1.2%.
David Jones in Australia increased sales by 1% with a lot still happening with regards to store refurbishments. Online sales grew by 46%, now contributing 7.7%, which is encouraging.
Country Road sales increased by 2.3%. Online sales for that brand now compromise 17.7% after a 20% increase for the period. Country Road is a well established brand, if you know your size, it is easy to shop online.
Retailers naturally go through cycles. And I am not just talking about economic cycles, sometimes they fall out of favour and have to earn back their clients. As an investor, it would be an expensive mistake to jump from one retailer to the next, trying to follow the trends (rather do that when you buy your clothes). It is best to stick with a quality brand like Woolworths and remain patient. The share price is currently reflecting this slump, when management turn things around, there should be good upside.
There was also an earnings update in the release which included the David Jones write downs. We will cover those numbers in more detail when the results are released.