Johannesburg - Woolworths, South Africa's largest retailer by market capitalisation, reported a 20.5 percent rise in full-year profit, boosted by sales at the Australian department store chain it bought last year and defying a tepid economy at home.
Adjusted pre-tax profit at the upmarket food and clothing retailer rose to R5.27 billion in the year to June from a R4.38 billion the previous year. Sales surged 55 percent to R61.97 billion ($4.74 billion), beating analysts' forecast.
Headline earnings per share - the most widely watched profit measure in South Africa - rose 6.7 percent, diluted by stock issued to fund the acquisition of David Jones in Australia in August last year.
Woolworths CEO Ian Moir said wealthier customers had been more resilient in both South Africa and Australia where many consumers in the mineral rich nations have had to tighten their belts as commodity prices slump.
He said Woolworths' customers were “in a better place” and said the company was well-placed to increase its market share.
In Australia it will close some of its David Jones stores in downtown Sydney and Melbourne and consolidate them into larger stores. “We want bigger businesses with more on offer,” Moir said.
The chain will also open leaner stores in other Australian cities and expand into New Zealand.
In its home market Woolworths is faring better than rivals thanks in part to the appeal of its high-end food offerings, such as fresh pasta, gourmet sauces and ostrich burgers, to its well-heeled customers.
Moir said the company would now focus on improving its food business in Australia and was even considering standalone food stores in the country. “For many people food has become the new fashion,” he said.
Avior Capital Markets analyst Kyle Rollinson said the company could do well if it managed to channel the savings from consolidating department stores into expanding its food business.
Private client money manager Vestact called the stock “pricey” after the release of the results, but said it still rated the retailer as a “buy”.
Shares in Woolworths have risen about 30 percent since the start of the year, but were down 2.5 percent at 96.37 rand at 1219 GMT, underperforming a 1 percent rise in the Johannesburg top 40 index.
REUTERS