The R21.4bn acquisition of David Jones‚ through the combination of cash‚ debt and a rights issue‚ was concluded on August 1 2014. Many analysts at the time believed the price to be outrageous‚ but the gamble appears to have paid off.
"The magnitude of the David Jones new-found presence is highlighted by the impact on Woolworths' group sales‚ which increased by 55.2%‚ a figure which is more than four times less with the omission of David Jones‚" said IG market analyst Shaun Murison.
In the 26 weeks ended December 28 2014‚ diluted headline earnings per share rose 6.4% to 192.4c compared with the year-earlier period.
Operating profit lifted 44.5% to R3bn and an interim cash dividend of 96.5c per share was declared for the period.
Woolworths CE Ian Moir said he was pleased with the results and that all business units performed ahead of the market‚ despite current tough trading conditions.
"We are progressing well with the integration of David Jones and the full ownership of the Country Road Group‚ which has positioned us as a leading southern hemisphere retailer and makes us better able to compete with the ever-increasing presence of northern hemisphere retailers‚" he said.
Clothing sales grew 9.4% in SA‚ with good performance from core men's wear and women's wear categories‚ and a softer performance from children's swear and footwear. Total clothing and general merchandise sales grew 8%.
The food division grew sales by 14.1% and operating profit lifted by 24.3%.
Woolworths said the larger supermarket format was working well and that the food division had now delivered above-market growth every month since September 2011.
Looking ahead‚ the company said it believed economic conditions in SA would remain constrained‚ especially in the lower- and middle-income segments of the market‚ where consumers remain highly indebted.
"Sales may be further impacted by load-shedding. The upper-income segment in which we operate continues to show resilience. We continue to trade ahead of the market and trading for the first six weeks of the new financial year has been positive.
"In Australia there are early signs of an improved retail environment and we expect sales in both David Jones and the Country Road Group to be ahead of the market‚" it said.
Murison said the company's results suggested a relative outperformance compared with locally listed retailers in the clothing and food departments.
"The recent and severe decline in oil has improved the outlook for the retail sector on the suggestion that consumers may have improved purchasing power. Should the consumer cycle sustain the short-term turnaround‚ Woolworths finds itself well poised to be a beneficiary thereof‚" he said.
Source: BDpro via I-Net Bridge
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