WOOLWORTHS’ new Australian business boosted group sales in the six months to December, but local demand remained muted as discretionary spending slowed towards the end of the year, retail analysts said yesterday.
Woolworths bought Witchery Group from Gresham Private Equity through its Australian business Country Road for A$172 million (R1.6 billion) in September last year. The sale included 210 fashion stores and a number of Mimco stores, which sell accessories.
The retailer said in a trading update yesterday that its sales for the 26 weeks to December 23 advanced 18 percent year on year, with sales in comparable stores up 9.4 percent.
Sales in Australia and New Zealand rose 55.6 percent with like-for-like sales increasing 10.7 percent. Net space, which excludes the new stores, contracted by 2 percent.
Absa Investments equity analyst Chris Gilmour said these figures could not be compared with the previous year as they included Witchery and Mimco. Although Woolworths’ interim sales were the most impressive results from retailers so far, they could not be compared to any previous period because they included the new acquisitions, he said.
“Overall the figures are better than those of most retailers so far. However, one has to wait for the real explanation from Woolworths of what boosted the sales.”
Gilmour said the 2 percent contraction in store space was an indication of the closing down of some stores in Australia.
Kagiso Asset Management equity analyst Simon Anderssen said the reported 55 percent growth from Australia included three months of sales from the Witchery and Mimco brands. “These inflate the overall growth number because they are not included in the comparison period.”
Clothing sales in South Africa grew 13 percent with a price movement of 5.5 percent. Sales in comparable stores added 7.7 percent.
In the food division, Woolworths Food grew sales by 11.1 percent with a price movement of 7.4 percent while like-for-like sales lifted 7.8 percent. Sales in its merchandise division were up 7.7 percent and by 4 percent in comparable stores.
Anderssen said in the full 26-week period sales were lower across all South African divisions compared with the 20-week period update released in November, while sales growth slowed towards the end of last year.
“In the food business, same-store sales were steady across the full 26-week period but benefited from rising food inflation towards the end of the period. Same-store sales slowed in the last six weeks of the period in the clothing business and there was a significant decline in the general merchandise division,” he said.
Anderssen said this was consistent with earlier updates from other retailers.
“It is also consistent with our view that 2013 is likely to be a challenging year for consumers and retail sales.”
Woolworths’ figures exclude last-minute Christmas sales with the trading period under review ending on December 23.
Anderssen said the comparative trading period for 2011 included trading up to and including Christmas Day, and many retailers have warned that Christmas last year fell on an awkward day of the week for trading. “It is therefore possible that these reported numbers are marginally understated because they exclude December 24 and 25.
Gilmour added that Woolworths’ food division sales were in line with Shoprite’s trading update.
Woolworths stock rose 0.65 percent to R63.90 yesterday.