Woolworths blames ‘taxi strikes and Avian flu’ for drop in fashion and beauty sales

The audited financial results of South African multinational retail company Woolworths Holdings show an increase in food sales but a decrease for fashion, beauty and home (FBH) products.

The financial results, for the 53 weeks ended 30 June 2024, show how tough economic times in South Africa and Australia affected operations.

Woolworths’ CEO, Roy Bagattini said SA’s turnover growth is at 6.7% and operating profit growth of 5.9%, above inflation. He describes these results as “solid”.

Decline in Woolworths’ FBH

The results show that there has been a sales decrease in FBH. The turnover and concession sales for the six months declined by 0.4%, with comparable store sales decreasing by 1.3%.

“Sales growth in H2 declined by 2.9%, with sales volumes further impacted by the late onset of winter,” added Bagattini.

He attributed the decline in sales to a weak macro environment, poor product availability and increased competition from the disruptive entry of international online retailers.

“Our teams remain focused on full-price sales, which positively impacted price movement of 8.9%.

Net trading space decreased by 0.2% relative to the prior period, while online sales increased by 30.4% and contributed 5.6% of South African sales.

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Sales increase in Woolworths Food

When it comes to Woolworths food, Bagattini said this side of the business delivered market-leading like-for-like sales growth, reinforcing its strength and resilience, and the trust customers place in the brand.

“Turnover and concession sales grew by 9.0% for the 52-week comparable period and by 6.9% on a comparable store basis.”

H2 turnover and concession sales increased by 8.5%. Price movement eased to 6.7%, delivering improving and positive volume growth.

“Space grew by 3.2% over the prior period, while online sales increased by 52.8%, contributing 5.5% of South African sales, driven by increased penetration of our Woolies Dash offering which delivered sales growth of over 70%.”

Trading challenges: Taxi strikes and flu

He said performance for the 53 weeks was impacted by a challenging trading environment, significantly by virtue of the macro-economic environment, which deteriorated throughout the year across SA and Australia.

It was significantly evident in Australia, as sustained interest rate increases and higher costs of living continued to impact consumer confidence, footfall and spending.

“In SA, business operations were disrupted by congestion at the ports for most of the period, as well as the impact of taxi strikes and Avian flu in the first half of the financial year.”

Woolworths expects the trading environment to remain constrained, while they have noticed the national election outcome and formation of a government of national unity, including the long suspension of load shedding have resulted in positive prospects.  

“However, the elevated interest rates continue to pose headwinds to consumer demand. The same is true for Australia, with the pace of macro recovery likely to prove more protracted than initially envisaged.”

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Change in the leadership

Woolworths’ report also states that Bagattini’s tenure has been extended, with no specified end date. He was appointed as the CEO on a fixed-term contract.

When it comes to the board of the Group, David Kneale said he will not be available for re-election at the upcoming Annual General Meeting and he will be retiring on 30 September.

He was a member of the board and Nominations Committee, and chairman of the Remuneration and the Risk, Information and Technology Committees. To replace him as the chairman of the Risk, Information and Technology Committee will be Rob Collins.

“The Remuneration Committee will be chaired by Hubert Brody as the interim Chairman.” All these interim appointments will take place on 1 October 2024.

Further appointments to the board include the appointment of Itumeleng Kgaboesele and Dr Nolulamo (Lulu) Gwagwa as independent non-executive directors of the company, with effect from 5 September 2024 and 1 November 2024, respectively.

“Itumeleng will also serve as a member of the company’s Risk, Information and Technology Committee, with effect from his appointment and as a member of the Remuneration and Talent Management Committee, with effect from the conclusion of the AGM to be held on 25 November 2024.”

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