Woolworths (Woolies) traded lower yesterday as the market digested the 2 percent decline in group sales during the first 20 weeks of the financial year. Photograph: Courtney Africa/African News Agency(ANA)
Woolworths (Woolies) traded lower yesterday as the market digested the 2 percent decline in group sales during the first 20 weeks of the financial year. Photograph: Courtney Africa/African News Agency(ANA)

Decline in group sales hits Woolies

By Dineo Faku Time of article published Nov 20, 2020

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JOHANNESBURG - Woolworths (Woolies) traded lower yesterday as the market digested the 2 percent decline in group sales during the first 20 weeks of the financial year on lower footfall and store closures due to Covid-19 across all of its markets.

Woolies shares fell 3.96 percent to close at R38.77 on the JSE yesterday, following news that trading conditions across its footprint continued to be impacted by the pandemic during the period under review.

The group said changes in consumer behaviour which prevailed during the last quarter had largely persisted, with store footfall, particularly in large shopping centres, CBD and airport locations at significantly lower levels than the prior period.

It said it, however, recorded continued growth of its food business, despite a steep sales decline in Fashion Beauty and Home, and further pressure on its financial services due to reduced discretionary spending and lower interest rates. The group said the recovery at its Australian business was hampered by the lockdown in the state of Victoria last month, resulting in unplanned store closures.

In South Africa, the easing of South Africa’s Covid-19 restrictions to level 1 was not enough to resuscitate consumer confidence.

“Whilst the National State of Disaster remains in place, economic recovery is slow and consumer confidence remains low,” said Woolies.

The group said turnover grew 9 percent at Woolies Food, with prices jumping by 7.1 percent, with reduced demand for lunchtime and snacking products and customers opting for larger pack sizes, the group said.

“The recently announced price investment across key product lines will temper price movement going forward,” said Woolies. Woolies last month announced that it was making its food products more affordable with a commitment to invest R1 billion in its prices over the next two to three years.

Sales at the FBI division slumped 14.6 percent underscoring its vulnerability to the constrained environment.

“The winter clearance sale was much smaller than that of the prior period and, together with a significant drop in demand for formal wear, negatively

impacted sales growth for the period, which declined by 14.6 percent,” said the group.

However the launch of summer ranges, coupled with the earlier start to Black Friday promotions, resulted in positive sales growth in the last three weeks of the period, said the group.

The Woolworths Financial Services book contracted 1.6 percent year-onyear at the end of October, compared to a 2 percent year-on-year growth at the end of June 2020 on further pressure on revenue growth.

“The focus on customer collections and payment relief initiatives and the timing thereof reflects in the shape of the book and the impairment rate for the period,” said Woolies.

The group said cash flow remained positive and net debt levels had continued to decline in both South Africa and Australia. “The various initiatives under way to ensure a more sustainable funding structure of our Australian entities are progressing well,” said the group.

BUSINESS REPORT

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