Woolworths (Woolies) tumbled 10 percent after posting the bleak numbers from its Australian division and lower than expected sales from the mainstay food business. Photograph: African News Agency(ANA)
Woolworths (Woolies) tumbled 10 percent after posting the bleak numbers from its Australian division and lower than expected sales from the mainstay food business. Photograph: African News Agency(ANA)

Woolworths says, Australian lockdown restrictions, unrest and load shedding weighed heavily on the group

By Dineo Faku Time of article published Nov 18, 2021

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WOOLWORTHS (Woolies) tumbled 10 percent after posting the bleak numbers from its Australian division and lower than expected sales from the mainstay food business.

It hit a low of R51.50 in intraday trade, later closing on the JSE at R53.80.

Woolies said the lockdowns in Australia would knock its financial performance for the first half of 2022. Chief executive Roy Bagattini, said: “While it is unfortunate that the impact of prolonged government-imposed lockdowns in Australia will negatively impact our overall results for the first half of the 2022 financial year, our teams have responded well to their immediate challenges, and more importantly, we remain steadfast in the execution of our longer-term growth strategies”.

The group said 70 percent of its Australian brick-and-mortar sales base had ground to a halt and up to 75 percent of trading days were lost over the period due to lockdown.

“The impact of these lost sales, coupled with the absence of government and rent relief initiatives which had supported the prior period base, negatively impacted the results of both our David Jones and Country Road Group businesses,” said Woolies.

In the 20 weeks ended November 14, 2021, group turnover and concession sales fell by 4.5 percent, compared with the prior period, and by 2.1 percent in constant currency terms.

Woolies recorded an impressive 26.4 percent jump in group online sales, saying they contributed 14.7 percent to the group’s total turnover and concession sales for the period. In South Africa Woolies said civil unrest that rocked KwaZulu-Natal in July, ongoing effects of Covid-19 and load shedding had weighed heavily on the group.

“To a lesser extent, international supply chain disruptions and supplier delays impacted availability of imported products,” said Woolies.

The retailer said turnover and concession sales in the food business increased by 3.2 percent and by 2.2 percent in comparable stores, with price movement of 2.6 percent and underlying product inflation of 3.8 percent.

“Sales growth for the current period should be considered in the context of the high Covid-19 base, which benefited from increased home consumption,”

said the group. Woolies, however, said on a cumulative basis food sales had grown 14.8 percent on a two-year basis, relative to the comparative 2019 period.

The group said local sales recorded a staggering 56.6 percent increase in online sales over the current period, contributing 3 percent of South African sales, while space grew by 0.4 percent relative to the prior period.

Commenting on the numbers, portfolio manager at Vestact Asset Management, Michael Treherne said Woolies had been hit hard by the lockdown in Australia and the local food business had regressed.

“The saving grace is that they already had a solid online division there. Locally, the food business effectively went backwards because their growth was lower than the input inflation.

“Management do note that food was coming off of a high base, because the division saw very strong growth with most people working at home last year,” Treherne said.

He said overall local online sales saw good growth, but off a low base.

“Management have a tough road ahead. They are still in the process of fixing the Australian business and locally there is increased competition from the likes of Shoprite and Pick n Pay, who are both moving into premium retail too.

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