Further slowdown in spending

Johannesburg - Woolworths' interim results reflected a further slowdown in consumer spending, especially in the middle and upper income levels, the listed retailer said on Thursday.

The slowdown was seen in the group's retail turnover, which grew just 8.1% for the 26 weeks to December 2008.

Profit before tax and exceptional items grew 18.1%, with improved profit from Country Road and one-off benefits arising from the sale of a portion of the Woolworths Financial Services business, the retailer said.

Adjusted headline earnings per share increased 26.9c to 72.2c a share and an interim dividend of 31.5c a share was declared.

Woolworths retail's overall sales grew 5.3%.

"We have, with no compromise to the quality, style and innovation that our customers expect from us, introduced more competitive opening price point merchandise,'" the company said.

However, for the period under review, clothing and general merchandise sales dipped 0.6%.

Childrenswear showed good growth during the period and food sales were up 9.5%.

"Our average food price inflation of 12.1% is well below the average market inflation.

"The price movement of only 9 percent reflects our customers' demand for our essential food items."

The retailer said that prices were now more competitive and it was better positioned to cater for its customers' needs.

Woolworths said that total footage grew by 7.1% during the period under review, with an increase of 4.9% in clothing and general merchandise and 14.7% in food at the end of December 2008, compared to the prior year.

Costs were well controlled, growing 1.6%.

Turning to its financial services, Woolworths said that closing debtors' books at December 2008 were marginally up on the previous year and bad debts were well controlled.

Income yields had improved. The company said its Australian brand, Country Road had again outperformed the Australian market delivering excellent sales growth of 22% and growing pre-tax profit by a record 83.8% in Australian dollars.

Looking ahead, Woolworths expected the economy to remain depressed.

"Our challenge will be to continue to manage the impact of the significant shift in consumer spending and the downward pressure on prices, while retaining our difference of quality and innovation," it said.

Cost and inventory management would be key drivers to manage profitability.

"Despite the relief from recent fuel price cuts and a reduction in the interest rates, we expect trade to remain difficult through the rest of the financial year," the company warned.

- Sapa