Woolies sales up 23%

This was in contrast to Shoprite and Massmart‚ both of which posted disappointing results‚ bemoaning the challenging environment as escalating utility‚ education and transport costs put a strain on South African households‚ eroding customer spending power.

Woolworths‚ which expects to report earnings per share for the 53 weeks to June that are between 23% and 28% higher than the previous year‚ is relatively shielded as it targets a more affluent consumer.

Noah Capital Markets retail analyst Roger Tejwani said that to a degree‚ as a higher income focused retailer‚ Woolworths was in a better position than some of the other retailers because of the customer base that it served.

"They are certainly more focused on the Living Standards Measure (LSM) of 8 to 10. There is relative strength and confidence at the high-end because of the very low rate cycle‚ obviously when the cycle turns that does change. The low-end are experiencing slower social grants and middle-income consumers are getting wage caps from public sector employment‚" he said.

Food, clothing sales up

For the 53 weeks‚ comparable sales in Woolworths clothing division rose 9.3%‚ compared with 7.2% in the 52 weeks ended 24 June last year. Food sales gained 12.1% from 10.0%‚ also on a comparable basis. Total sales in both divisions increased 13.7% and 15.4%‚ respectively.

"It looks like clothing has come under a bit of pressure‚ there is no real volume growth in their like-for-like stores. I presume that it's weather related. The fairly mild winter has probably affected them because they're traditionally quite strong in jackets and knitwear and heavy outerwear‚" Tejwani said.

In its aim to be the destination of choice for well-heeled grocery shoppers‚ the 82-year-old company has been extending its ranges‚ expanding stock-keeping units and offering more branded goods‚ as part of its supermarket strategy of converting basket shoppers to trolley shoppers.

Luis Colaço‚ an equity research analyst at BPI Capital Africa‚ said Woolworths had been growing ahead of competitors in the food segment and gaining market share.

"This is visible when we compare it with Shoprite's recently disclosed sales and also with SA food retail sales. Woolworths‚ operating in a market niche‚ has proved that it's more immune to economic slowdown and higher inflation than other retailers. Its food business is less cyclical‚ as the demand for its products is more inelastic‚ with price effect more than offsetting volume effect‚" Colaço said.

Meanwhile‚ sales were up 12.0% in the group's Australian business‚ Country Road.

The Woolworths Financial Services debtors book grew 15.8%‚ with the impairment rate for the year at 1.9%.

"The 15.8% is below total revenue growth‚ meaning that the proportion of sales coming from unsecured lending was reduced. Even so‚ their impairment rate stood flat at 1.9% when compared with 2012 and this is significantly below the average of the sector which is around 5%‚" Colaço said.

Source: BD Live via I-Net Bridge