Woolworths shares touch 52-week high on profit forecast

JSE-listed retailer Woolworths expects its headline earnings per share (Heps) for the first half of 2023 to increase by between 70% and 80%, falling within the range of 285.9 cents and 302.8 cents, as higher festive spending in South Africa and increased footfall in Australian stores boosts performance.

Woolworths’ share price jumped as much as 6.84% to reach a 52-week high of R74.79 in early morning trade on Thursday. Fellow retailer Truworths also reached a 52-week high of R65.68 after rising 4.9% in late morning trade.

Its food retailer rivals also had a good session. Shoprite was up 1.47% to R245.80, while Pick n Pay was up 2.51% to R62.55.

The food, clothing and beauty retailer reflected on its performance for the 26 weeks ended 25 December 2022 and forecast its earnings expectations for full year operations in a trading statement on Thursday.

For the period, Woolworths reported a 18.5% (16.3% in constant currency) increase in group turnover and concession sales.

“I am very pleased with our performance in the first half, and particularly over the festive season. The successful execution of our strategies is not only enhancing our business value today, but also building strategic resilience for tomorrow,” CEO Roy Bagattini said.

Load shedding impact on food

The food business – which is arguably the star of the Woolworths portfolio – reported a 7.6% increase in turnover and concession sales for the period. Further, in the last six weeks of the period – the height of promotional and festive spending in the country – sales grew by 8.6% compared with the previous year.

However, Woolies adds: “This is notwithstanding the considerable disruption caused by load shedding, which continues to have a pronounced impact on our predominantly fresh business in terms of foregone sales, and increased waste.”

The retailer noted that it is having to fork out significantly more money to keep its diesel generators running to enable trade during black outs, and to keep its fresh food from going to waste.

Read:
An energy crisis is seeping into SA’s food supply
Fresh not so good for Woolies (Sep 2022)
Woolies (really) should stick to food and forget about Aus – Gilmour (Dec 2022)

Australian stores get busier

The return of shoppers to physical stores in Australia, following the easing of Covid-19-related lockdown restrictions, is boding well for Woolworths’ Australian operations.

Country Road group, the better-performing international brand in the group’s portfolio, reported a 25.5% spike in turnover and concession sales during the period.

However, due to the harsh impact the Covid-19 lockdown had on Australian operations in the last year, the retailer notes that the two periods cannot be directly compared.

“Our businesses in ANZ continued their positive momentum, notwithstanding the increased inflationary pressures faced by consumers during the period,” Woolworths said.

Soon to exit the group, David Jones also reported a jump in turnover and concession sales, increasing by 31.8% in the 26-week reporting period.

Read: Woolworths finally sells David Jones

Woolworths noted that it expects the disposal of the brand from its portfolio to be finalised come the end of March 2023. It expects to realise more value in selling the brand than it currently does in keeping it around.

Read: PnP and Woolies intensify on-demand delivery battle

Listen: Faheema Adia of Momentum Securities on what to expect from food retailer updates