South African listed retailer Woolworths Holdings on Wednesday reported headline earnings per share of 105 cents for the year ended June, up 17,4% from 89,4 cents a year ago. On a diluted basis, HEPS were up 18% to 103 cents from 87,3 cents before.
A final dividend of 39 cents per share was declared, making a total dividend of 63 cents from 54 cents before.
The I-Net Bridge analysts’ consensus forecasts was for HEPS of 109 cents and a dividend of 65 cents.
The group’s revenue increased by 16,6% to R15,1-billion, while operating profit increased by 21% to R1,5-billion and the operating margin improved from 9,5% to 9,8%.
The group’s gross profit margin was maintained at 34,3% despite the ongoing change in the mix of its business. This was achieved by an increased margin in the clothing and home division which was driven through effective sourcing and lower stock markdowns.
The share repurchase in March 2005 resulted in an increase in borrowings over last year and a substantial increase in finance costs, it said. Headline earnings per share and return on equity were enhanced as a consequence.
The group said consumer spending in South Africa remained strong but growth in the last few months was slightly slower due to increasing interest rates and higher inflation.
During the year Woolworths’ retail divisions experienced good growth. The implementation of significant systems enhancements affected the whole organisation from the buying groups through to stores. The clothing and home division was restructured, supporting the strategy of providing consistent taste and a more differentiated product.
Clothing and home grew sales by 12,4% in total and 8,2% in comparable stores, with an average deflation rate of approximately 1%. Despite the shortage of core products throughout winter, like-for-like volume growth was still strong.
Food continued to perform well and sales grew by 22,5% in total and 11,9% in comparable stores, with an average inflation rate of approximately 4,2%.
Market share increased from 8% to 8,5%. Growth is being driven by the ongoing roll-out of convenience stores, its innovative offering and improved value, the group noted.
Trading space was expanded by 6,4% in clothing and home and 14,4% in food over the period.
In the financial services division, good growth was experienced in the in-store card, credit card and personal loan books of 22,3% for the year to June 2006. The net bad debt experience on the combined books increased from 2,4% to 2,9% of advances due to a tougher credit environment, the planned rise in store card debt and some system implementation challenges.
In the Country Road division, retail sales were 8,2% higher in Australian dollar terms with comparable store growth of 7,3%. Country Road is changing its wholesale business to a concession model which will give it full price and range responsibility.
Total sales decreased by 1,7% in Australian dollar terms, due to a decline in wholesale sales given the planned transition to concession.
Looking ahead, Woolworths said it expects the growth in consumer demand to be more moderate and the credit environment to continue to tighten.
Earnings will be negatively affected by the possible implementation of quotas on goods from China as well as the recent decision to fix the usury rate charged on unsecured credit until July 1 2007.
Woolworths added that as a key part of its broad-based Black Economic Empowerment strategy, it is finalising plans for a broad-based share scheme for employees, the majority of whom are black. This scheme will be presented to shareholders for approval at a general meeting to be held this financial year. – I-Net Bridge