Johannesburg - Woolworths’s position at the upper end of the market allowed it to be resilient in a slow spending environment in the year to June, it said yesterday, as other retailers suffered from indebted consumers being forced to cut spending.
Shares in the listed seller of high-end food and clothes leapt 8.62 percent to close at R65 as it reported a 27.3 percent surge in headline earnings a share to R3.40 for the 53 weeks to June compared with the prior 52-week period.
Group chief executive Ian Moir said Woolworths benefited from loyal customers and tailored its offering according to their needs and purchases.
“We have done a good job in terms of listening to our customers and giving them what they want,” Moir said. Return customers who shopped more often allowed the retailer to take up more market share.
Food sales grew 15.4 percent to R17.5 billion, compared with Statistics SA’s estimation of 7.1 percent annual market growth in June.
Clothing and general merchandise sales grew 12.3 percent to R10.8bn for the period.
Clothing chain Country Road was boosted by the acquisition of Australian fashion brand Witchery Group lifting sales 68.5 percent in Australian dollar terms and 90.8 percent in rand.
The company planned to take up more market share by expanding its Country Road and Trenery stores.
The Woolworths loyalty programme allowed the company to track the shopping patterns of customers, Moir said.
Rewards reached 3 million active users, and 67 percent of sales were made through the cards. Moir said the rewards programme was successful because it offered instant gratification, with discounts awarded at till points.
The retailer said it continued to conduct 70 percent of sales in cash, with the balance made on in-store credit cards.
“Our customer is not a customer that was affected by unsecured lending,” Moir said.
Woolworths Financial Services reflected year-on-year growth of 15.8 percent in the debtors book while only 1.9 percent of debts were written off – unchanged from the impairment rate the year before.
Retailers such as Truworths, Foschini and Shoprite have said recently that they were weighed down by debt among consumers as unsecured lending tightened.
36One Asset Management analyst Cy Jacobs said the results showed that Woolworths was in top shape, helped by good management.
“It’s the only retailer that’s not showing pressure,” Jacobs said. Its exposure to richer shoppers boosted sales as wealthy households were not as constrained by the tough economic climate.
“Woolworths customers aren’t looking for credit,” said Jacobs, referring to the low rate of bad debts.
The company said it expected local economic conditions to remain constrained, especially in the lower and middle segments of the market, where consumer debt levels continued to exert pressure on household budgets. - Business Report