Woolworths shares closed 8.5% lower at R37.78 on Wednesday after a trading update showed that even its food business is under pressure. A year ago, the shares were trading at around R52. The update covers the 19 weeks to 8 November, and across the whole group, sales grew just 0.2%. Woolworths blamed a tough environment in both South Africa and Australia, where high fuel prices, inflation and interest rates are squeezing shoppers, who are increasingly sticking to promotions and essentials.
Even food is slowing
Food has long been the dependable part of Woolworths, which is what made this update sting. Woolworths South Africa as a whole grew sales by 1.6%, and within that, food sales grew just 1.9%, and only 0.1% in comparable stores. Over the same period, prices rose an average of 3%, which implies shoppers are actually buying fewer items. Casparus Treurnicht of Gryphon Asset Management told News24 that Woolworths is no longer recovering market share, and that Checkers seems to be taking share even from wealthier shoppers. There were brighter spots, though. Online food sales grew 24.1% and now make up 9.1% of food sales, and Woolworths says its newly completed acquisition of in2food will support its margins. In fashion, beauty and home, homeware sales grew 6.4% and beauty 3.1%. Its financial services arm is feeling the squeeze too, with the annualised impairment rate rising to 7.3% from 6.7%.
Trouble in Australia
Things aren't looking much better in Australia. Country Road Group's sales fell 9.5%, with all of its brands under pressure. To make matters worse, several of those brands trade as concessions inside David Jones, the Australian retailer Woolworths sold to Anchorage Capital Partners in 2023, which collapsed into administration on 5 November. Woolworths says it's talking to the receivers and assessing what this means for the trading relationship.
All of this lands on Sam Ngumeni, the former head of Woolworths Food who took over as group CEO in June and has said his focus will be on the food division. The next trading update, covering the festive season, is due in mid-January, and it'll show whether that focus is starting to pay off.
