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Retail

South Africa's Woolworths H1 Profit Falls As Shoppers Spend Less

By Reuters
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South Africa's Woolworths H1 Profit Falls As Shoppers Spend Less

South African retailer Woolworths reported a 7.5% fall in half-year earnings, as consumers pulled back on discretionary spending and the country's energy and logistics crisis persisted.

The food, fashion and beauty products retailer, which targets mid- to upper-income consumers, said its headline earnings per share (HEPS) from continuing operations fell to 203.3 cents in the 26 weeks ended 24 December, from 219.9 cents a year earlier.

For total operations, HEPS declined by 31%.

Group turnover and concession sales from continuing operations, excluding retailer David Jones that it sold last year, rose 5.4% to 38.1 billion rand (€1.8 billion) and by 4.4% in constant currency terms.

Profit before tax fell by 14.2% to 2.5 billion rand (€120 million).

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Challenging Macroeconomic Backdrop

Woolworths said its results were impacted by an increasingly challenging macroeconomic backdrop, given the sustained effect of interest rate increases and higher living costs.

"This negatively impacted footfall, resulting in a greater-than-expected pullback in discretionary spend in both geographies," it said, also referring to Australia.

In South Africa, business operations were further disrupted by higher levels of power cuts, congestion at ports due to equipment failures and the impact of Avian flu on the availability of key food product lines.

The port congestion curtailed turnover and concession sales growth at Woolworths' fashion beauty and home business to 2.2% due to poor availability of products, in part due to the late arrival of certain summer ranges.

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The company's food business reported turnover and concession sales growth of 8.4% in the first half. On a comparable basis, it increased by 7.2%.

Underlying product inflation for the period averaged 9.1%, which was below headline food inflation as the company invested in price reduction measures.

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