[Image: Wikimedia Commons]
Woolworths is in a bit of a bind, it seems.
Its once-unshakable food empire is facing some serious challengers, and its clothing business is still floundering, BusinessTech reports.
The company’s financial results for the 26 weeks ending 29 December 2024 confirmed what most already knew- its fashion, beauty, and home (FBH) division is still a hot mess.
Turnover in this segment limped up by just 2%, which doesn’t even keep up with inflation. The excuse is some vague issues with product flow and late supplier deliveries. But if we’re being real, Woolies’ clothing game has been weak for years.
It’s not just struggling against local competitors; its international expansion was a straight-up disaster. Remember the R29 billion it threw at David Jones in 2015? All debt-funded, by the way. Well, that blew up spectacularly. Woolworths eventually cut its losses, selling David Jones for a measly R1.6 billion. Ouch.
And while it held onto the Country Road business, that hasn’t exactly been a joyride either. Things have gotten so bad that they’re now scrambling to restructure it just to stop the bleeding.
For a long time, Woolies Food was the golden child keeping the whole operation afloat. But times are changing. The high-end food space isn’t a private playground anymore, and Woolworths no longer enjoys an almost effortless grip on the premium market.
Sure, in the latest results, Woolworths Food looked solid; turnover jumped 11.4%, with gross profit margins at 24.9%. Woolies Dash was also up a nice 49.2%, while online food sales were up 37.2%. Not bad.
But zoom out to a five-year trend, and the cracks start showing. Revenue has grown an average of 7.2% per year (in six-month intervals), which sounds impressive until you realise profitability is heading in the opposite direction.
Profit before tax has only managed an average growth of 2.7% per year, and margins have slipped from 7.5% to 6.3%. So, while revenue is climbing – up 49% in five years, from R16.6 billion to R25 billion – profits aren’t keeping pace. Profit before tax only rose 25%, from R1.3 billion to R1.6 billion. That means expenses are outpacing revenue growth, and that’s a problem.
Woolworths Food vs. The New High-End Grocery War
One major reason Woolies Food is feeling the heat? Competition. And not just from any competition – Checkers, Pick n Pay, and Spar are all throwing serious weight behind premium food offerings.
Checkers Sixty60 has already chipped away at Woolworths Food’s dominance, and Checkers is giving its physical stores a facelift to lure in wealthier shoppers.
Meanwhile, Spar is plotting a full-scale invasion. Their CEO, Max Oliva, recently spilled the beans: 30 to 40 high-end grocery stores are on the way. The first of these, Spar Gourmet, is set to open in Q4 of 2025. They’re locking in prime locations, rolling out a sleek new store design, and stacking their shelves with exclusive, high-end products.
Even Vida e Caffe is getting in on the action, securing spots in every Spar Gourmet store. If there’s one thing moneyed South Africans love, it’s overpriced coffee.
Pick n Pay isn’t sitting back either. They’re revamping their stores, improving layouts, tweaking product selections, and upping their staff training. They just opened a flashy new supermarket at Westown Square in KZN, and they’re making sure it looks and feels premium. Think artisan breads, a sushi counter, a sit-down coffee bar – you know, the Woolworths aesthetic, but with a Pick n Pay badge.
Oh, and to top it off, Pick n Pay is now FNB’s primary grocery partner for the eBucks programme. That’s a whole new wave of customers getting lured away from Woolies.
So, yes, Woolworths’ food division, once untouchable, is now in the fight of its life. With competition closing in from all sides, maintaining its market share is going to be anything but easy.
[Source: BusinessTech]
