- Group Sales: 40.3 billion rands, up 5.7% year-over-year, and 6.2% in constant currency.
- Woolworths South Africa Sales Growth: 9.1% increase.
- Adjusted EBITA: 4.5 billion rands, down 6.4% from last year.
- Adjusted EBIT: 2.8 billion rands, down 13.7%.
- Adjusted Profit After Tax: 20% decrease.
- Adjusted Diluted EPS: Declined by 19.4% to 1.69 rands per share.
- Interim Dividend: 1.07 rands per share, based on a 70% payout ratio.
- Net Borrowings: 4.7 billion rands, reduced from 5.6 billion at the end of the last financial year.
- Return on Capital Employed: 17%, above the cost of capital but lower than last year.
- Food Business Sales Growth: 11.4%, with a gross profit margin increase to 24.9%.
- Fashion, Beauty, and Home Sales Growth: 2.5% increase.
- Country Road Group Sales: Decreased by 6.2%.
- Woolworths Financial Services Profit Growth: 6.6% increase in underlying profit after tax.
- CapEx Investment: 1.6 billion rands in the first half, with a total of 3 billion rands planned for the year.
- Free Cash Flow: 600 million rands generated in the half.
- Food Online Sales Growth: 37%, contributing 6.4% to food sales.
- Fashion, Beauty, and Home Online Sales Growth: 25%, contributing 6.6% to FBH sales.
- Return on Capital Employed for Food Business: 51.3%, or 55.6% excluding Absolute Pets.
- Net Trading Space Reduction: 2.1% year-on-year for Fashion, Beauty, and Home.
- Gross Profit Margin for Country Road Group: Decreased by 320 basis points to 58.9%.
Release Date: March 05, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Woolworths Holdings Ltd (WLWHY, Financial)'s food business demonstrated remarkable strength, achieving sector-leading growth and consecutive market share gains.
- The company's beauty business continues to strengthen, with double-digit sales growth, reinforcing its position as a leading beauty shopping destination.
- Woolworths South Africa delivered a commendable turnover growth of just over 9%, driven by strong performance in the food sector.
- The company successfully sold the Burke Street property in Melbourne, recognizing a profit on disposal and closing the David Jones chapter.
- Woolworths Holdings Ltd (WLWHY) has been recognized externally for innovation and excellence, including being named among the world's most trustworthy companies and leading retailer for sustainability in South Africa.
Negative Points
- The apparel businesses in South Africa and Australia faced significant challenges, leading to a 13.7% decline in adjusted EBIT and a 19% drop in adjusted diluted EPS.
- Operational challenges in upgrading the inventory management system disrupted product flow, impacting sales and profit during the critical festive period.
- The Country Road Group in Australia performed below potential, with sales decreasing by 6.2% and a significant drop in EBIT due to restructuring disruptions.
- The macroeconomic environment in Australia remains tough, with high living costs and interest rates impacting consumer spending and retail footfall.
- The company's increased CapEx and investments in transformation initiatives have negatively impacted short-term financial metrics, including a 20% decline in adjusted profit after tax.
Q & A Highlights
Q: Food had price inflation of 6% versus Shoprite at the 2% to 3% range. Is this a concern going forward given that your price points are increasing relative to peers?
A: Roy Bagattini, CEO: Our inflation tends to lag that of our peers due to our exclusive supplier base. We are seeing higher inflation in key categories where we have higher market shares, such as coffee and chocolate. We are not lifting prices but continuing to invest in price and product quality. Our food customer base increased by 8%, indicating the value customers see in our proposition.
Q: Given CRG's performance, has the impact of the sale of David Jones been greater than anticipated?
A: Roy Bagattini, CEO: The dissynergies from the separation were slightly more than expected, but the bigger issue was the negative leverage from lower gross profit due to a tougher macroeconomic environment and increased promotional activity. Despite this, we are controlling core costs well.
Q: How confident are you in achieving the 10% EBIT margin target for Country Road Group, given the current performance?
A: Roy Bagattini, CEO: We are confident in achieving our target as the necessary levers, such as GP margin and cost to sale, are within our control. We are consolidating supply and driving economies of scale, which will support a better GP margin and lower cost to sale.
Q: What has driven the uplift in GP margin in the food business, and how sustainable is it?
A: Zaid Manjra, CFO: The GP margin increased by 30 basis points due to selling more products at full price, effective promotional activity, and efficiencies in the value chain. These gains are sustainable as they are underpinned by process changes, although future DC investments may impact margins.
Q: Can you elaborate on the high OpEx growth in the food business?
A: Roy Bagattini, CEO: The 15% OpEx growth is due to investments in strategic growth initiatives and the inclusion of Absolute Pets. We expect OpEx growth to be closer to 10% in the second half.
Q: How should we think about the risk to markdowns in H2 given the higher inventory levels?
A: Zaid Manjra, CFO: We are seeing encouraging full price sales in the second half, and much of the late-arriving inventory is part of our core range, which is non-seasonal. Therefore, we do not foresee any material markdown risk.
Q: What value accretive opportunities are you referring to with the use of Bourke Street proceeds?
A: Roy Bagattini, CEO: The proceeds will be used for significant growth opportunities in fashion, beauty, home, and food businesses in South Africa, as well as initiatives under Woolies Ventures.
Q: What is the future outlook for Woolworths Ventures?
A: Roy Bagattini, CEO: Woolworths Ventures encapsulates our strategic growth initiatives and has the potential to become a significant part of the group. We are growing sales in double digits and have clear plans for each venture, such as W Seller and food services, to expand market share and reach.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
