South Africa-based Woolworths has reported a positive trading update for the 26-week period ending 27 December 2020, with its performance driven by its food operations.
The retailer said group sales fell by 0.5% at constant currency terms but rose by 5.3% excluding exchange rate effects. Woolworths said the results showed the ‘improved trading momentum across all businesses over the final six weeks of the reporting period’.
COVID-19 continuing to impact on operating environment…
Woolworths said its stores continued to feel the effect of COVID-19 restrictions at the end of 2020. This had led to ‘significantly reduced store footfall, particularly in larger shopping centres and CBD locations’.
…In South Africa…
In its home market, Woolworths said ‘weak macro and consumer confidence has been exacerbated by COVID-19’. Despite the headwinds Woolworths said its Food division ‘remained resilient’, with sales up by 10.9% in total and by 9.4% in comparable store terms. The company said its Food division had seen further volume and market share gains, ‘driven by innovation, convenience and the focused price investment strategy’.
Net space growth had added a further 0.4%. Underlining the positive impact its had enjoyed in the last six weeks of the trading period, the retailer said sales had risen by 12.0% in that period alone.
Woolworths said price movement was 7.1%, impacted by mix, while average product inflation stood at 4.8% over the period. Its previously announced programme of price investment on key lines remained a strategic focus and had been positive received by shoppers during the timeframe.
…But it benefited from positive influence from online sales
Woolworths said its online channel accounted for 2.2% of its Food sales, following growth of 158.5% in the trading period. The expansion of its click and collect service and the trial of an on-demand delivery service had underpinned the channel’s growth during the timeframe.
Despite the switch to online buying, Woolworths reported the gross profit margin at its Food division was 0.2% higher to 24.8%. The retailer noted the increase came ‘notwithstanding further price investment, due to higher rebates, improved waste and distribution cost efficiencies’. As a result, adjusted operating profit rose 23.2% to ZAR1.53 bn (US$101.1m), returning an operating margin of 8.2% for the half’.
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