In the South African retail sector, consumers are under pressure and more picky shoppers avoid shops putting through marked price increases.
Still, Cape Town-based retailer Woolworths – with a foot in the grocery segment and a foot in the fashion arena – looks anything but flustered.
Last month, the company showed sales (for six months to end December) up 16% to R19,4bn with the clothing and general merchandise outstripping the South African apparel market; and the food business also trading ahead of the market.
Profit before tax increased by 21% to R2,16bn. The company also disclosed 2,8 million Woolworths card holders, which tracked 69% of sales.
Woolies is also committed to growing its business. In an investor presentation, CEO Ian Moir said the company was determined to continue building bigger stores, as well as expanding the convenience store format.
“Woolies SKUs (stock keeping units) had grown from 6,400 to 10,000 in four years.” He indicated there were plans to grow SKUs to 12,000 in the short-term.
Expansion is unlikely to come at a cost to bottom line. Moir said, “By 2016, Woolies wants the trading margin in its clothing business to top 19%, while the food business aims for a sumptuous margin of 7% [which is almost 2 percentage points higher than grocery sector market leader Shoprite Holdings.]”
Moir said economic conditions remained constrained in the lower and middle income segments of the market, where consumer debt levels remain under pressure. But he believed the upper income segment - in which Woolworths operates – would continue to show resilience.
“Trading for the first six weeks of the second half of the financial year has been positive. We expect sales growth to be broadly in line with the first half,” Moir concludes.
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