Woolworths Grows in South Africa, but Faces Challenges in Australia

Woolworths Reports Strong Growth in South Africa Despite Australian Market Challenges

Woolworths, a major South African retail group, released a trading update covering the 18 weeks ending 3 November 2024, highlighting impressive performance in its South African Food sector but acknowledging tougher-than-expected trading conditions in Australia.

Woolworths South Africa Food Sales Surge

In South Africa, Woolworths’ Food segment saw a robust turnover and concession sales growth of 12.1%, with comparable-store growth of 7.3%. This growth underscores Woolworths’ popularity among South African consumers, even amid rising inflation. Notably, food sales increased by 9.6% when excluding the contribution from Absolute Pets, which Woolworths acquired in late 2023. Average price inflation was 6.2% for the period, with trading space expanding by 2.0%, excluding Absolute Pets.

Woolworths also experienced significant growth in online sales, which jumped by 36.9% and contributed 6.2% to overall Food sales. Woolies Dash, the company’s on-demand delivery service, was a key driver, with sales surging by 54.4% during this period.

Growth in Fashion, Beauty, and Home

Beyond food, Woolworths’ Fashion, Beauty, and Home segment also showed positive momentum. Turnover and concession sales rose by 3.5%, with a comparable-store growth of 2.8%. This continued expansion demonstrates Woolworths’ commitment to delivering quality and style across all segments of its South African operations.

However, the Woolworths Financial Services book revealed a 3.5% decline in performance compared to the previous year. When adjusting for legal book debt sales, the book increased by 2.1%, with the annualized impairment rate improving from 7.5% last year to 5.9% this year.

Challenges in Australia’s Retail Market

While Woolworths’ South African operations flourished, its Australian division, led by the Country Road Group (CRG), faced difficulties due to challenging market conditions. Woolworths reported an 8.8% sales decline in CRG, with a 13.8% decrease on a comparable-store basis, attributing the downturn to reduced foot traffic, increased promotional competition, and consumer preference for value-focused brands.

Despite these setbacks, the Country Road brand remains resilient, and Trenery has shown strong topline growth after recent rebranding efforts. Woolworths also remains committed to repositioning Witchery and other brands to align with changing consumer demands in Australia.

Woolworths’ Strategic Focus

Woolworths’ recent trading update reflects a balanced approach, with strong domestic growth countering international challenges. As Woolworths adapts to market shifts in Australia, its strong South African food sales and expanding online presence showcase the resilience of the Woolworths brand.

This strategic focus positions Woolworths to navigate diverse market conditions and continue thriving as a leading retailer across both regions.