Woolworths just showed how quickly a good year can lose momentum. The upmarket food and clothing retailer told the market its group turnover and concession sales grew 4.3% over the 52 weeks to 28 June, and 4.8% in constant currency. But after a strong first half, growth in the second half slowed to 3.3%, dragged down by a particularly tough final quarter.
What went wrong in the second half
Management pointed to the war in the Middle East, which pushed fuel prices and inflation higher, dented consumer confidence and demand, and raised operating costs. On top of that came renewed interest-rate increases in both South Africa and Australia, which nudged shoppers towards promotions and the essentials. Woolworths South Africa still delivered solid sales growth of 5.4% for the year, though its momentum eased to 4.1% in the second half. The Food business kept outpacing the market with 5.7% growth, while Fashion, Beauty and Home felt the squeeze most, with second-half growth slowing to 2.6%.
The Australian turn and a new CEO
There was a genuine bright spot down under. Country Road Group, the Australian arm that has been bleeding money for years, returned to full-year profitability, helped by a deliberate shift to full-price sales and a leaner operating model. The catch: it did not recover as far as Woolworths had hoped before the war began. All of this lands on the desk of Sam Ngumeni, who took over as group chief executive in June and is largely inheriting the same balancing act his predecessor Roy Bagattini faced.
For the full year, Woolworths expects headline earnings per share (its core measure of profit) to rise between 2.5% and 7.5%, to 274.8c-288.2c. Reported earnings per share are set to be flat to 10% lower, mostly because the prior year was flattered by the sale of its Bourke Street property. The full results are due on or about 2 September, when Ngumeni will get his first real chance to show whether the recovery can find its feet again.
