Woolies sees tougher second half as inflation hits shoppers

Source: Reuters/Siphiwe Sibeko

In its trading update for the 52 weeks ended 28 June 2026, the group said it expects a modest increase in annual profit, following a stronger first half but a more challenging second half across parts of the business.

The update provides an early view of the performance of one of South Africa’s most prominent retail groups at a time when consumers are becoming increasingly selective about where and how they spend.

While Woolworths South Africa has continued to benefit from the resilience of its food business and its premium positioning, the group’s Australian operations have faced a more difficult trading environment, particularly in apparel.

Consumer pressure hits the second half

Woolworths said trading conditions deteriorated during the second half as consumer spending came under pressure.

The company pointed to higher fuel prices, inflation and interest-rate increases associated with the broader economic environment, including the impact of geopolitical tensions in the Middle East.

The shift is particularly evident in the group’s Country Road Group (CRG) business in Australia and New Zealand.

CRG reported full-year sales growth of 1%, or 1.6% on a comparable-store basis, but sales declined by 0.5% in the second half.

Woolworths said the apparel sector in Australia and New Zealand remained intensely promotional as retailers sought to reduce excess inventory, while higher interest rates and geopolitical uncertainty put additional pressure on consumer sentiment, footfall and spending.

The environment creates a delicate balancing act for retailers: discounting can stimulate demand, but aggressive promotions can also put pressure on margins.

CRG has opted to limit its participation in some of the promotional activity in the market in an effort to protect profitability, a strategy that has contributed to weaker sales momentum.

Food remains a key strength

The contrasting performance across Woolworths Holdings’ businesses highlights the continued importance of its South African food operation.

Woolworths South Africa entered the year with strong momentum, reporting 6.8% turnover growth in the first half, with adjusted EBITDA increasing by 5.9%. The group said all businesses delivered positive sales and profit growth during the first half.

Food has consistently been a major growth engine for the retailer, supported by customer demand for fresh and convenient products, premium private-label offerings and differentiated ranges.

The retailer has also continued investing in its food infrastructure and customer proposition. Its acquisition of prepared-foods manufacturer in2food, announced earlier this year, is intended to strengthen Woolworths’ position in premium convenience foods and extend its control of an important part of the food supply chain.

Digital convenience is another area of investment. Woolworths recently opened a dark store in Wynberg to improve the speed, reliability and availability of Woolies Dash deliveries in Cape Town’s southern suburbs.

Fashion faces a more cautious consumer

The trading update comes at a particularly important point for Woolworths’ Fashion, Beauty and Home (FBH) business, which has been undergoing a turnaround.

While the business has made progress, the broader discretionary retail environment remains challenging as consumers prioritise essentials and become more cautious about larger purchases.

This pressure is not confined to South Africa. CRG’s performance demonstrates how challenging conditions in international apparel markets are affecting Woolworths Holdings’ broader portfolio.

The Australian fashion market has become increasingly promotional, with competitors using discounts to stimulate demand amid weak consumer spending.

For Woolworths, maintaining its premium positioning while remaining relevant to increasingly value-conscious consumers will be critical.

A new leadership chapter

The trading update also comes as Woolworths Holdings prepares for a leadership transition.

Sam Ngumeni was appointed Group CEO earlier this year and is set to take over from Roy Bagattini, who will retire at the end of September after more than six years leading the group.

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Ngumeni has already begun reshaping the organisation, with Woolworths announcing an organisational reset in June designed to strengthen accountability, simplify decision-making and make the business more agile.

The changes come as Woolworths seeks to accelerate execution while navigating a retail environment characterised by cautious consumers, intense competition and ongoing cost pressures.

The road ahead for Woolworths

The latest trading update suggests that Woolworths Holdings is entering a more challenging phase after a period of relatively strong performance.

The group’s South African food operation remains a key source of resilience, while its investments in convenience, loyalty, supply-chain capability and premium product innovation provide potential avenues for continued growth.

At the same time, the weaker performance from Country Road Group highlights the risks facing discretionary retail as consumers cut back and competitors intensify promotional activity.

The challenge for Woolworths will be to protect its premium brand positioning while ensuring that its value proposition remains compelling enough to retain increasingly discerning shoppers.

With a new CEO preparing to take the reins and an organisational reset already underway, the 2026 financial year could prove to be an important transition point for the retailer — one in which growth will depend as much on disciplined execution and customer relevance as on the strength of its brands.