Woolworths expects its earnings to increase by more than 20% despite flagging that the energy crisis continued to have a pronounced impact on its business.
In its trading statement for the 52 weeks ended June 25, 2023, the retailer said on Friday that it expected earnings per share, headline earnings per share for the Total Group, including the contribution from David Jones, to be more than 20% higher than the reported earnings per share (eps), and headline earnings per share (heps) for the prior year.
Headline earnings are expected to be 405.6 cents to 442.4c from 368.7c the prior year, while earnings per share are anticipated to be 401.7c to 438.2 from 365.2c the previous year.
The group, which disposed of its David Jones operations in March 2023, said David Jones would be reported as a discontinued operation in its full-year results.
Woolworths reported that turnover and concession sales from continuing operations, excluding David Jones, increased by 10.8% for the year and by 9.3% in comparable stores.
“Sales grew by 9.2% in the second half of the year, notwithstanding the impacts of rising inflation and interest rates in both geographies and severe load shedding in South Africa.
“Online sales grew by 9.3%, contributing 8.3% to the group’s turnover and concession sales from continuing operations, compared to 8.4% for the prior year,” it said.
Despite this, the group said its fresh food business was affected by South Africa’s debilitating energy crisis, resulting in increased waste and a higher overall cost of doing business, due to the significant increase in diesel costs across its store network and supply chain.
“Our focus throughout the year has been protecting the integrity and quality of our product, whilst simultaneously implementing ways to minimise the operational and financial impacts of extended power outages,” it said.
Woolworths said the food business grew turnover and concession sales by 8.5% and 6.3% on a comparable store basis for the full year.
“Growth accelerated to 9.4% in H2 (7.2% in comparable stores), driven by both increased footfall and improved availability, notwithstanding the considerable disruption caused by higher levels of load shedding.
“Price movement of 8.3% for the year was below underlying product inflation of 9.9%, as we continued to enhance our overall customer value proposition,” Woolworths said.
Fashion, beauty, and home business turnover and concession sales grew by 8.9% and by 8.3% on a comparable store basis for the year.
The WFS (Woolworths Financial Services) book reflects a year-on-year increase of 14.5% to the end of June 2023, driven by growth in new accounts and credit card advances.
“The impairment rate for the 12 months ended June 30, 2023 was 7.3%, compared to 4.7% in the prior year, reflective of rising consumer strain in the current macro-economic climate, which has resulted in elevated default rates, particularly in the last quarter of the year,” it said.
In its Australian and New Zealand businesses, the retailer said following a very strong first-half result, trading momentum saw a pronounced deceleration in the second half, as the impact of sustained increases in interest rates and higher costs of living weighed on consumer confidence and discretionary retail spend.
“Country Road Group sales grew by 12.0% and 12.4% in comparable stores, underpinned by strong growth from the Country Road, Politix, and Witchery brands. Whilst sales growth in H2 slowed to 0.6%, it remained ahead of the market.
“David Jones turnover and concession sales for the nine months in the current year decreased by 11.3% relative to the statutory 12 months reported in the prior year. Turnover and concession sales on a comparable nine-month basis increased by 23.6% and 21.0% in comparable stores,” it said.
Its share price fell 0.28% to R78.30 on Friday.
BUSINESS REPORT