Shares in South African retailer Woolworths lost ground in morning trade on Thursday after the group released a trading update for the six months to July showing a disappointing performance from its Australian subsidiary and slightly softer-than-expected sales for the Christmas period.
At 11am, Woolworths shares were down 2% or 20 cents to R7,50 after briefly trading as low as R7,40, weaker than the FTSE-JSE general retailers index, which was down 0,3% so far on the morning.
Woolworths earlier reported a 13,7% rise in sales for the six months to the end of December 2003 from a year earlier, with like-for-like sales up 7,5%.
Clothing and home division sales rose 10,9% in total and by 7,9% on a comparable store basis, while food division sales were 17,7% higher, or up 7,7% on a like-for-like basis.
The sales data shows that the group’s sales growth picked up only slightly over the Christmas period — in its November 20 trading update for the four months to mid-November it reported 10,9% growth in its clothing and home division, and 16,7% in its food division.
Retail sales were expected to escalate over the holiday season, not only due to seasonal reasons but also because of increasingly favourable economic conditions for consumers thanks to falling interest rates and inflation.
The performance is also coming off a strong 2002 base. A year earlier, Woolworths reported overall sales growth of 20%, or 15,8% on a like-for-like basis. Textile sales were up 15% overall (12,3% on a comparable store basis), while food sales rose by 25,2% (18,1% on a comparable store basis).
More disappointing was the performance of the group’s Country Road clothing chain in Australia, where sales for the six months were 6,7% below those of a year earlier in Australian dollar terms, amid continuing extremely competitive conditions. The business was expected to record a small profit for the year, Woolworths noted.
Country Road has been extensively restructured over the past two years and its loss-making United States operations sold.
After a remodelling of its business processes and supply chain management, including the complete replacement of its core IT systems in July, it announced expansion plans comprising the creation of 10 “destination” concept stores and an agreement with fellow department store retailer Myer Grace Bros to increase the volume of Country Road products available across the entire Myer Grace Bros store network on an exclusive basis. — I-Net Bridge