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Woolworths Holdings’ H1 profit falls on Australia arm write-down

Comments (0) Actualites, Africa, Australia, Business, Economy, Politics

JOHANNESBURG (Reuters) – South African retailer Woolworths Holdings Ltd posted a 15 percent fall in half-year profit on Thursday hurt by a hefty write-down charge on the value of its David Jones business in Australia and tough trading conditions in its home market and Australia.

Woolworths paid a big premium to bulk up in Australia via David Jones as part of Chief Executive Ion Moir’s ambitions to turn the firm into a leading southern hemisphere retailer, but the delayed execution of certain initiatives aimed at transforming David Jones is threatening that ambition.

“A challenging market, along with some mistakes in the implementation of new systems and ranges, has had an impact on our clothing businesses both in South Africa and Australia,” Moir said in a statement.

Australia has recorded soft retail sales growth for months as cut-throat competition, relentless price discounts and online competition sap demand for brick-and-mortar shopping.

While in South Africa retailers have struggled to grow earnings as weak economic growth and clothing markdowns by competitors hit sales.

Woolworths, which sells groceries, food and homeware, said headline earnings per share (HEPS) fell to 206.3 South African cents in the six months to Dec. 24, from 242.6 cents a year earlier, while earnings per share turned into a loss of 505.9 cents on the David Jones impairment.

Woolworths booked a non-cash impairment charge of A$712.5 million ($556.04 million) against the carrying value of David Jones as a result of the cyclical downturn and structural changes that have hurt performance across the Australian retail sector.

The retailer, which paid 21.4 billion rand ($1.84 billion) for David Jones in 2014, said the impact of these changes have been exacerbated by poor or delayed execution in certain key initiatives in David Jones.

David Jones sales were 3.3 percent lower on a comparable basis, while comparable store sales were 3.4 percent lower in Woolworths South Africa, hurt by underperformance in Woolworths Fashion, Beauty and Home.

The group declared an interim cash dividend of 108.5 cents, an 18.4 percent decrease on the prior period.

“Encouragingly, we are seeing signs of recovery now, with political change in South Africa expected to lead to increased consumer confidence,” Moir said.

South Africa’s new president, Cyril Ramaphosa, was sworn in as head of state last Thursday after his scandal-plagued predecessor Jacob Zuma resigned on orders of the ruling African National Congress.


($1 = 1.2814 Australian dollars)

($1 = 11.6563 rand)


(Reporting by Nqobile Dludla; Editing by Gopakumar Warrier)

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South Africa’s Woolworths to conserve cash as growth slows

Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – South African retailer Woolworths Holdings Ltd will aim to conserve cash as growth slows in its home market, Chief Executive Ian Moir said on Thursday.

Shares in the retailer slid to a two-month low despite posting a 30.6 percent jump in first-half profit.

Woolworths, which sells upmarket food and clothing, warned rising interest rates in South Africa would further pressure consumers in Africa’s most advanced economy, where it makes nearly 60 percent of its sales.

“It would be more conservative, in what is a volatile environment, to offer scrip rather than cash,” said Woolworths Chief Executive Ian Moir, referring to dividends paid in shares rather than cash.

Shareholders will have a choice between a scrip and a cash dividend, the company said.

If all shareholders chose scrip, Woolworths would have 1.5-1.6 billion rand more for investment and to pay off debt, Moir said.

The company is committing capital to its expansion plans in Australia, said Moir, where it last year bought department store chain David Jones.

South Africa’s retailers are battling to boost sales as consumers check spending, though Woolworths has done better than rivals due to its appeal to high-income customers.

But a severe drought in southern Africa and the weaker rand is expected to stoke food price inflation, and though higher maize prices should not have a direct impact on higher income shoppers, their spending could sag.

“When we see food inflation coming through, our customers, even at the upper end, tend to buy less items,” said Moir.

Sasfin Securities analyst Alec Abraham said though Woolworths posted good operational results, Moir’s downbeat comments on South Africa’s growth outlook might have contributed to the share price fall on Thursday.

Earnings per share were affected by costs to acquire David Jones and the dilutive effects of share issues to finance the transaction and a black empowerment deal.

Headline earnings per share, the most widely watched profit measure in South Africa, which strips out certain one-off items, were up 30.6 percent at 253.5 cents for the six months ended Dec. 31.

Shares in Woolworths were down 7.5 percent at 86.37 rand by 1050 GMT, compared with a 2.1 slide in the JSE’s benchmark Top-40 index.


(Reporting by TJ Strydom; Editing by Subhranshu Sahu and Mark Potter)

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South Africa’s Woolworths says strike won’t affect operations

Comments (0) Africa, Economy, Latest Updates from Reuters

JOHANNESBURG (Reuters) – Workers at a distribution centre for South African retailer Woolworths are on strike over pay, the company said on Monday but the high-end grocery and clothing seller said the strike would not affect operations.

“We can confirm that the National Union of Food Beverage Wine Spirits and Allied Workers at our Midrand Distribution Centre have embarked on protected strike action,” the firm said.

“Business continuity plans are in place for continued operations and our customers should not experience any disruption in the supply of goods to stores.”

The union was demanding wage increases of 110-130 percent for its members, Woolworths said.

Shares in Woolworths were flat at 102.28 rand by 1316 GMT compared with a 0.8 percent fall in the general retailers index.

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