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Woolies expects interim earnings to rise 20% boosted by customers returning to stores

Woolies expects interim earnings to rise 20% boosted by customers returning to stores

Shares of retail giant Woolworths (Woolies) increased by almost 7% after it announced that it expected its half year earnings to surge, boosted by customers returning to physical stores, especially in Australia, after prolonged government-imposed lockdowns.

The shares traded at an intraday high of R69.10 and have increased by 13.38 in the past six months.

In its trading update for the 26 weeks ending December, 2022 yesterday, the retailer said headline earnings per share were expected to rise by more than 33.6 cents or 20% to 201.8c, compared to last year’s 168.2c.

Turnover and concession sales for the reporting period increased by 23.3%.

“The return of customers to physical stores, particularly in Australia, resulted in a substantial increase in brick-and-mortar sales, and a consequent easing in online sales, which declined by 13.7%, contributing 10.1% to the group’s total turnover and concession sales over the period,” Woolies said.

In the South African business, Woolies reported that the fashion, beauty and home business had a strong start to the year, with turnover and concession sales growing by 10.8%, and by 10.9% on a comparable store basis.

“The focus on improving the underlying financial health of our respective business in fashion, beauty, and home continues to deliver positive results with full-priced sales growing by 15.2% for the period, and clearance sales down more than 20% in South Africa, following the smallest and most profitable winter sale to date,” it said.

Price movement averaged 11.1% and remained positively impacted by the successful implementation of its markdown reduction strategies.

“Trading space was reduced by 2.4% over the prior period. Online sales grew by 1.5% and contributed 4.2% of South African sales,” the group said.

Its food business improved its run rate through the period, growing turnover and concession sales by 7.3% and 5.1% on a comparable store basis.

“This was notwithstanding the considerable disruption caused by load shedding, which has had a pronounced impact on our predominantly fresh categories across the business in terms of foregone sales and increased waste, while significant increases in diesel costs required to support trade during the extended power outages,” it said.

The Woolworths Financial Services book reflected a year-on-year increase of 12.0% on October 31, 2022 driven by the post-Covid recovery in consumer spend, as well as new business and credit card advances.

Its businesses in Australia and New Zealand continued their positive momentum, with both David Jones and the Country Road group delivering sales above pre-Covid-levels.

“As mentioned previously, trade in the prior period was impacted by the extended lockdowns, resulting in relatively higher growth rates in the current period compared to the prior period,” Woolies said.

David Jones’s turnover and concession sales increased by 55.3%, with our flagship and CBD-located stores performing well ahead of expectations, it said.

Country Road group sales grew by 36.2%, underpinned by particularly strong performances from the Country Road, Politix, and Witchery brands, following the successful launch of new ranges which resulted in a higher proportion of full-priced sales.

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