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Retailer Woolworths sees uptick in online sales

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Retailer Woolworths has reported massive growth in online sales in its interim results for the 26 weeks ended 26 December 2021.

Announcing the results today, the retailer says online sales grew by 22.4%, contributing 13.7% to the group’s total turnover and concession sales for the period.

Sales in the last six weeks of the period increased by 3%, and by 3.5% in constant currency terms, says the company.

However, Woolworths says group turnover decreased by 1%, and by 0.3% in constant currency terms, given the impact of lost sales arising from the prolonged lockdowns in Australia.

Commenting on the results, Roy Bagattini, Woolworths group CEO, says: “I am pleased with the progress we have made against our various strategic initiatives, particularly in the context of the ongoing effects of COVID-19.

“We have traded our businesses well, notwithstanding the extended lockdowns in Australia, tightly managing inventory, controlling costs and converting sales into cash. We have reduced our debt by a further R7 billion over the past year and have ended the period in a net cash position – the strongest balance sheet we have had since 2014.

“I’m very excited by our runway for profitable growth, and the opportunities we see to invest in our diverse businesses. We are on track to rebuild our financial credentials, drive long-term value creation, and restore our business to its rightful place in the hearts and minds of all our stakeholders.”

The retailer notes that despite a very high COVID-19 base, the food business grew turnover and concession sales by 3.8% for the half, and by 5.8% in the last six weeks of the period.

On a two-year basis, sales have grown by a cumulative 15.2%, relative to the comparative 2019 period.

Online sales increased by 55.8%, contributing 3.1% of South African sales, while space grew by 2.2% relative to the prior period.

Gross profit margin of 24.1% was 70 basis points (bps) lower than the prior period, as a result of the high volumes and low waste in the base, continued price investment, and the higher online sales contribution, says Woolworths.

It adds that expenses grew by 6.3%, due to the ongoing investment in online and digital capabilities and higher energy costs. Adjusted operating profit declined by 8% to R1.4 billion, returning an operating margin of 7.2% for the period.

“Turnover and concession sales in our fashion, beauty and home business grew by 4.2% and by 4.7% in comparable stores.

“Growth on last year was impacted by the reduced footprint, rationalising brands and ranges, the timing of summer clearance, and the underperformance in selected womenswear categories. Online sales grew by 19.2%, contributing 4.4% of South African sales, while the ongoing execution of space reduction initiatives reduced the footprint by 6.1%, resulting in improved trading densities.”

The retailer notes that with a deliberate focus on driving full-price sales, coupled with increased promotional effectiveness, gross profit margin increased by 40bps to 46.3%, notwithstanding inflationary supply chain pressures.

“Expenses reduced by 0.9% as we improved operating efficiencies through space reduction and other initiatives. Adjusted operating profit increased by 34% to R780 million, resulting in an operating margin of 11.6% for the period.”

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