Woolworths expands food division but clothing remains biggest profit driver

While its food division contributed 40% of group revenue, its contribution to pretax profit was 36%. Its clothing and general merchandise division, meanwhile, contributed just 21% of revenue but 39% of pretax profit.

Australian department store chain David Jones contributed 22% of revenue and 23% of pretax profit, and sister Australian retailer Country Road 16% of revenue and 17% of pretax profit.

Woolworths' bottom line was boosted by R1.76bn profit from the sale of David Jones's Sydney headquarters, bumping basic earnings per share up by 25% to 566.7c.

But diluted headline earnings per share, which exclude profit from the property sale, declined 8% to 417.7c. The final dividend was maintained at R1.33, holding the total dividend for the year flat at R3.13 per share.

Though clothes and general merchandise contributed the most profit, Woolworths' focus in the reporting period was on expanding its biggest revenue generator, food. Woolworths added 11 new food stores during its 2017 financial year, expanding its food retail space by 7.6%. Food revenue grew 8.5% to R27bn and pretax profit rose 8.3% to R2bn.

"Average price movement for the year was 8.4%. Lower food inflation into the second half of the year saw the return of increasingly positive volume growth," CEO Ian Moir said in the results statement.

Its clothing and general merchandise sales grew 1.4% to R14bn while pretax profit fell 6% to R2.2bn. Clothing retail space grew by a net 2%.

"Despite the difficult trading conditions, we traded ahead of most other apparel retailers and continued to build our fashion credibility with a segmented, brand-directed customer experience," Moir said. "We are in the process of rolling out our new beauty offering that will bring international brands such as Chanel and Estee Lauder into our stores for the first time."

Though David Jones grew revenue slightly in Australian dollars, in rand it declined 1% to R15bn and pretax profit plummeted 29.5% to R1.3bn.

"We have continued to drive the transformation of David Jones and have achieved significant milestones on numerous key initiatives, including the launch of a new customer relationship management programme, new merchandise and inventory management systems and the opening of a new David Jones Food concept in Bondi Junction, Sydney," Moir said.

Country Road's revenue grew 1.6% to R10.8bn, but pretax profit fell 5.7% to R958m.

Source: BDpro