Deloitte’s recent Global Powers of Retail report ranked the biggest retail groups in the world, giving us some insight into how South Africa’s retailers measure up to international companies and each other.

Steinhoff made a comeback as the country’s biggest earner, followed by Shoprite.

Woolworths ranked fifth in terms of revenue in South Africa, and 43 places behind Pick n Pay in the global rankings.

Then, on Thursday, Woolworths reported a significant drop in earnings for the 26 weeks ending December 29, 2019, which, according to BusinessTech, has lead to “a reduced interim dividend”.

The food and fashion retailer said that in South Africa the constrained economic environment, power outages, unseasonal weather in parts of the country, and underperformance in clothing led to a slower second quarter.

Eskom has been bad for business countrywide. Economic growth in South Africa has been weak overall due to power cuts. It’s no wonder Cape Town is looking into buying energy from independent power producers.

To make things worse for Woolworths, it’s also seen marked competition from other chains like Checkers, which recently opened its first FreshX concept store aimed at the wealthier clientele – Woolworths’ bread and butter when it comes to the consumer market.

More stats from the earnings report:

• [Woolworths] added that 2019 retail sales growth averaged 1.2% – the weakest rate since 2009.
• Group turnover and concession sales increased by 3.8% to R40.9 billion and adjusted profit before tax of R2.4 billion was down 12.3%.
• Woolworths said that earnings per share and headline earnings per share decreased by 9.0% and 10.1% respectively.
• Adjusted diluted HEPS decreased by 11.7% to 179.1 cents per share.
• The group declared an interim gross cash dividend of 89.0 cents, a 3.3% decrease on the prior period’s 92.0 cents per share.
• Group turnover and concession sales for the 26 weeks ended 29 December 2019 increased by 3.8% compared to the 26 weeks ended 23 December 2018 and by 4.6% in constant currency terms.

“Adjusted profit before tax of R2.4 billion was down 12.3%” – ouch.

Woolworths Fashion, Beauty and Home underperformed in women’s clothing and on Black Friday, which they put down to “under-participation” (good for you South Africa, Black Friday is a graft).

It also noted that the fashion available probably wasn’t up to scratch in terms of “product failure” and  “a lack of newness in summer”.

This time last year, Woolworths wasn’t looking too hot, either. Then the retailer blamed it on its fashion being “too young and fashionable”.

In 2018, they admitted to making a few “fashion faux pas”.

Just a thought, but maybe hitting the extremes is the problem here – find a middle ground.

On to food sales:

Turnover and concession sales increased by 8.1%, and by 7.8% after adjusting for the shift in trading weeks, with comparable-store sales 5.4% higher and price movement of 5.1%.

The business has maintained positive volume growth for the period and continues to grow market share, the group said. Net space growth was 4.0%.

Gross profit margin of 24.6% was in line with the prior period despite further price investment.

Expenses grew by 8.5% and operating profit increased by 8.0% to R1,157 million, with an operating margin of 6.9%.

For more stats and figures, head here.

I’m pretty sure everyone at the company will be hoping that this report isn’t an indicator of the year to come.

[source:businesstech]