Woolworths Holdings Limited said its profit fell for the first time in eight years, a sign of waning local demand and recessing economy at Africa’s largest economy.
The South African company attributed its misfortune to a number of problems.
First of which is the technical recession due to political uncertainty, credit rating downgrades, low growth in disposable income and increased unemployment
South Africa’s GDP growth forecasts in 2017 and 2018 have also been revised downwards with little relief expected in the short-term.
Woolworths Holdings also noted that under the current political and economic conditions, subdued consumer confidence is expected to persist.
Things are not also rosy in its Australian operations. The company noted in its presentation to its shareholders that growth in the mining and commodities dependent economy is expected at a rate lower than long-term average Despite record
Woolworths also noted that despite record low-interest rates, the Australian consumer is heavily indebted with recent regulations increasing mortgage costs. Consumer confidence in Australia remains below the baseline.
It further gets grimmer when Woolworths said together with low wage growth, underemployment and increasing energy costs, disposable income and consumer confidence will remain under pressure.
On the overall, turnover was up 3.0%, adjusted profit before tax down 8.3%. Adjusted profit for the period fell by 8.3% to ZAR5.5 billion.
Headline earnings per share declined by 7.6% while the company’s total dividend maintained in line with last year.
Woolworths said it had a good and above market Food sales growth throughout the period and a satisfactory performance in Woolworths Clothing and General Merchandise, given the macroeconomic conditions.David Jones sales marginally above relevant market within a highly constrained, promotionally driven retail environment • Above market performance from Country Road Group, marked improvement in the second half
David Jones sales marginally above relevant market within a highly constrained, promotionally driven retail environment with above market performance from Country Road Group, marked improvement in the second half.
However, Woolworths Chief Executive Ian Moir is confident Woolworths, said he is confident that “I’m losing sleep over a lot of things and Shoprite is not one of them.”We have been at the top end of this market forever, we know the market. We have made it difficult for anyone to attack our model.”
He told Reuters that: “We have been at the top end of this market forever, we know the market. We have made it difficult for anyone to attack our model.”