Woolworths: Resilience in food sales despite declining group earnings

Woolworths' Food division delivered above-market performance, reinforcing its position as a leading South Africa food retailer, after its turnover and concession sales grew by 11% for the year to June 29.

This was even though the South African retailer on Wednesday reported a 23.9% decline in full-year headline earnings, due to a weaker than expected performance from its Australian clothing chain Country Road Group (CRG), which underwent a significant restructure.

The Foods division reported sector-leading growth of 7.7% on a comparable-store basis. Excluding the Absolute Pets acquisition, Food sales grew by 9.2%, highlighting strong momentum in the core business.

Volume growth was driven by increased footfall and larger basket sizes, supported by an innovation pipeline and enhanced customer experience, the group directors said in its financial results that were released on Wednesday.

“This year’s results reflect the strength and resilience of our premium Food business, but also the transformation undertaken across our apparel businesses. Following significant investment over the past few years, we have completed the heavy lifting, which now positions each of our businesses to deliver to their true and full potential through our loved and trusted brands,” Roy Bagattini, the CEO, said in a statement.

Woolies Dash, the on-demand platform, increased sales by 41.6%. Overall online channels continued to expand rapidly, with online Food sales growing by 32.9% and contributing 6.6% to total Food sales.

Overall group turnover and concession sales increased by 6.8% on a constant currency basis. Nevertheless, a 7.3% increase in the second half indicated the possibility of slowly improving trading conditions, in spite of the challenging macroeconomies across Australia and South Africa.

Adjusted earnings before interest and tax (aEBIT) fell by 10.9% to R5.2 billion, while adjusted earnings before interest, tax, depreciation, and amortisation (aEBITDA) decreased by just 3.8% to R8.7bn, reflecting the impact of investment in growth-enabling initiatives.

The property in Melbourne, Australia was sold for A$223.5 million, recognising R792m profit on disposal.

Earnings per share (EPS) were down 1.4%, impacted by impairments to underperforming Australian CRG fashion and lifestyle brands and the one-off sale of the Australian property, with headline EPS and adjusted diluted headline EPS declining by 23.9% and 19.2%, respectively.

Woolworths South Africa saw strong turnover and concession sales growth of 9.4% for the year, and 9.8% in the second half. This supported adjusted EBITDA growth of 6.8% for the full year, and 10.9% growth in the second half.

Gross profit margin expanded by 20 basis points to 24.9%, underpinned by promotions, volume benefits and supply chain efficiencies, which more than offset the impact of a growing online channel and ongoing investment in the customer proposition.

In Fashion, Beauty, and Home (FBH), turnover and concession sales increased by 4.7%, with comparable store sales up 5.1% and full-price sales exceeding 80% of total sales. Trading momentum improved throughout the period, delivering sales growth of 7% in the second half, through improved product availability, as product flow challenges in the first half were resolved.

The Beauty business gained market share, growing by 14.7% over the period. Its online sales increased by 22.8% and contributed 6.6% to total FBH sales.

Increased promotional activity, additional supply chain costs from the transformation of the Distribution Centre, and higher levels of inventory, coupled with the margin-dilutive impact of a growth Beauty contribution, saw aEBITDA decline marginally by 0.4% to R2.5bn.

That said, improved momentum in the second half resulted in positive profit growth.

Woolworths Ventures, the newly launched division that houses the Food Services, WCellar, Pet and WEdit businesses, delivered a strong maiden result, with mid-teens sales growth and aEBIT growth of over 20%.

Woolworths Financial Services’ book decreased by 2.7% on a year-on-year basis to the end of June 2025 and increased by 0.5% when excluding the sale of part of the legal book of R1.6bn. 

CRG in Australia completed a restructure to reset as a standalone business, within an unconducive macro backdrop. Sales fell by 5.4% and 6.8% on a comparable store basis.

Bagattini said the group was well positioned to benefit from its strategy, growing customer base, strengthened brands and foundational capabilities, and investments in new avenues of growth.

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