Womenswear mistakes, poor Black Friday dent South Africa's Woolworths' half-year profit
By Nqobile Dludla
JOHANNESBURG (Reuters) - Weak womenswear sales and a poor Black Friday showing tarnished the first-half financial year results posted on Thursday by South African retailer Woolworths Holdings, which acknowledged making "mistakes" on style and pricing.
"This was another tough period of trade," Outgoing Chief Executive Officer Ian Moir told analysts at the group's results presentation in Cape Town.
Moir said while sales and comparable store sales in the retailer's South African fashion, beauty and home division rose by 2.2% and 0.9%, respectively, in the 26-weeks ending Dec.29, it had a poor second quarter due to a lack of variety and volume of goods for Black Friday on Nov. 29, with prices kept too high.
"We suffered the consequences and saw it leading up to December as well because the only thing people are interested in December is newness (new items) and we didn't have enough newness in December," he said.
Womenswear sales suffered due to fashion "mistakes" in its Studio W and Classic brands, with some prints proving unappealing with shoppers, other items overly austere and a failure to balance formal and urban wear.
Moir said the retailer's efforts to turn around the fashion business, particularly in womenswear, would continue "with a focus on design to deliver better ranges and taste levels" as well as on price.
The retailer has hired a new managing director, Manie Maritz, who will start in June.
The company, which sells food, clothing and homeware, said headline earnings per share (HEPS), the main profit measure in South Africa, declined 17.7% to 164.9 cents from 200.4 cents a year earlier.
The decline in profit was compounded by an accounting change, Woolworths said. Excluding the impact of the accounting change, HEPS fell 10.1%.
Group turnover and concession sales rose 3.8% to 40.9 billion rand ($2.72 billion), while adjusted profit before tax dropped 12.3% to 2.4 billion rand.
CORONAVIRUS SEEN DELAYING SUPPLIES
Moir said the coronavirus outbreak that has killed more than 2,000 people in China, has hit sales at the start of the second half because Woolworths' Australian retailer David Jones had missed out on high-spending Chinese customers due to a travel ban. The beauty and fashion divisions have been most affected.
"It's a little bit difficult to get a grip right now on how much it will affect supply. We think at least a month's delay in products, could be more," Moir said.
He said the retailer is looking to mitigate the risks by flying in some products that are normally shipped in order to get them on the shelf as quickly as possible.
Roughly half of the products in Woolworths South Africa, its biggest market, come from China. In Australia, about 70% of Country Road Group stock is Chinese-made and about 60% at David Jones, Moir told Reuters in a telephone interview.
($1 = 15.0420 rand)
(Reporting by Nqobile Dludla; Editing by Aditya Soni and Helen Popper)
