Woolies Six Month Numbers

Woolies released their half year numbers Thursday. The retailer reported a 2.9% drop in headline earnings on the back of bad performance by the David Jones brand in Australia which has proven to be a disaster of an acquisition to say the least.

The overall sales for the group were up a pedestrian 2.4% to R37 billion for the 26 weeks of trading up until the 23rd of December 2018. If we look at the segmental breakdown, food contributed 42% to total sales and 27% to profits.

Food sales grew 6.3% to R15.4 billion and operating profits grew 4.6% to R3.8 billion marking solid consistent growth for about 7 years now. Food saw really good online sales growth which led to healthy operating margins of 7%.

Country Road was the second biggest contributor to the bottom line with operating profit up 1.2% to R3.6 billion, a sweet 26% contribution to the groups overall profits.

The remainder was made up by David Jones which contributed 21% to group sales and SA Fashion, Beauty, and Home division, which contributed 19%. These two segments both made up 23% of the bottom line.

CEO Ian Moir has said that Woolies really slipped up on the fashion front, and got it absolutely wrong by going too fashionable to try and appeal to a younger audience and in the process neglecting its core customer of ages between 45 and 60. Fast Fashion is synonymous with The Foschini Group, Zara and H&M meaning competition was tough, the good news is that Woolies is going back to first principles!

Moir did promise that all the vanity projects are now over after the big refurbishment at Elizabeth Street in Australia which has set Woolies back by A$ 30million for the year and falls away next year.

Woolies cut the interim dividend by 15% which was the flow from the Australian business so the company can focus on lowering the A$400 million debt by about half and once that milestone is reached, the dividend cover will go back to normal again.