The upmarket retailer‚ which expected to launch Australian fashion brands Witchery and Mimco in the country in March‚ planned to open up 47 of these stores in SA over the same period‚ it said on Thursday, 13 February 2014.
Woolworths wants to be a leading fashion retailer in the southern hemisphere. The Cape Town-based group has ramped up its clothing procurement strategy‚ allowing it to shorten lead times‚ as it focuses on a quick-response model‚ as global powerhouses Zara‚ H&M and Topshop do.
Woolworths can now get to market in five to seven weeks on more than 30% of its goods‚ where previously it took more than 11 months.
The retailer has invested heavily in new systems and established a merchant academy to train its buyers‚ planners‚ technologists and designers. It also uses customer data to segment merchandise and plan the layout of its stores.
Faring better than SA's other retail players‚ Woolworths on Thursday reported a 22% rise in aftertax profit to R1.57bn as its well-heeled customers kept tills ringing.
With consumer confidence in SA at its lowest level in 20 years‚ most retailers have reported markedly slower growth‚ as shoppers in the middle-to-low living standard measures feel the strain of rising utility costs‚ escalating personal debt‚ unemployment and a sharp fall in the extension of credit.
However‚ with more disposable income‚ the upper-income consumer has remained resilient‚ thanks in part to the low interest rate cycle‚ which has also given them the capacity to take on some credit and use credit cards.
Diluted headline earnings per share (HEPS) were 18.2% higher at 189.4c in the six months to end-December from 160.2c a year earlier and HEPS were at 192.4c from 164.2c a year earlier.
Sales grew 16.2% to R19.38bn and an interim dividend of 101c per share was declared. The group generated a return on equity of 55.9%.
Woolworths CEO Ian Moir said the group was pleased with its results and its focus on the upper-end consumer segment was paying off.
"All segments of the business performed well‚ but the stars were our food business and the Country Road group in Australia. We continue to build stronger‚ more profitable customer relationships through our WRewards programme‚" he said.
Clothing sales grew by 10.1%‚ with a price movement of 4.4%. Clothing sales in comparable stores grew by 8%. General merchandise grew by 6.9% and by 5. 1% in comparable stores.
In the food division‚ Woolworths' supermarket strategy‚ aimed at capturing a greater share of their customers' total food shop‚ also showed improvement. Food sales grew by 15.3%‚ with a price movement of 7.2%. Sales in comparable stores grew by 11.8%.
"The food business traded strongly throughout the period‚ and well ahead of the market‚ with increased promotional pricing significantly changing customer perceptions‚" the group said.
In the food space‚ it has taken Pick n Pay and Checkers head-on through its supermarket strategy of converting basket shoppers to trolley shoppers. Woolworths is wooing its competitors' grocery shoppers by extending its ranges‚ expanding stock-keeping units‚ offering more branded goods and introducing more bulk.
All four brands - Witchery‚ Mimco‚ Country Road and Trenery - in the Country Road stable performed strongly in both Australia and SA.
With the inclusion of Witchery for the full period‚ sales increased 27.5% in Australian dollars. Gross margins improved significantly from 61.3% to 63.0% and profit before tax grew by 50%. Country Road is now a significant rand hedge‚ contributing more than 20% of profits.
Country Road‚ Woolworths' 88%-owned subsidiary‚ concluded the acquisition of 40-year-old fashion retailer Witchery Group from Gresham Private Equity for A$172m (R1.6bn) in October 2012.
The Woolworths financial services debtors book reflected year-on-year growth of 13.8%.
"The quality of the book remains strong‚ despite the broader credit environment‚" Woolworths said.
In terms of the rest of Africa‚ the company completed negotiations for the conversion of 33 of its previously franchised stores in Botswana‚ Namibia‚ Swaziland and Ghana‚ which would bring focus to the sub-Saharan region and build critical mass for merchandising‚ store operations and supply chain.
Fast-growing African economies were becoming more attractive to consumer companies in search of higher yield.
Urbanisation and rising affluence are fuelling a boom on the continent‚ with a rising middle class clamouring for high-quality goods and services.
The continent's consumer-facing industries are expected to grow by $400bn by 2020‚ representing its single-largest business opportunity‚ a McKinsey report shows.
Looking ahead‚ Moir said that although the group believed economic conditions in SA would remain constrained‚ especially in the lower- and middle-income segments of the market‚ where consumer debt levels remained under pressure‚ the upper-income segment in which Woolworths operated continued to show resilience.
"Trading for the first six weeks of the second half of the financial year has been positive. We expect South African sales growth to be broadly in line with the first half and to remain ahead of the market in Australia‚" he said.
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