Woolworths continues to show strong growth

Cape Town – Retailer Woolworths said first-half headline earnings per share increased by 30.6% with a 17.1% increase in revenue of R35.5bn and a 48.1% increase in gross profit.

The increase was attributed to a turnaround in the clothing division as well as a strong continued performance by the food division and David Jones in Australia.

In its results for the 26 weeks to 27 December 2015, Woolworths [JSE:WHL] group CEO Ian Moir said he is particularly happy with the clothing sector turnaround.

“There has been a strong turnaround in the South African clothing business following corrective management action, and the transformation of David Jones continues to deliver the results we expected,” he said in a statement on Thursday.

Clothing and general merchandise experienced an improved half, with sales growing 12.5% in South Africa and Clothing sales up 11.7%. Operating profit increased by 14.6%.

Its share price was up 0.85% at R93.29 at 08:50 on Thursday, sitting with a PE ratio of 25.02 and a market cap of R97.25bn.

“Through our positioning as a leading Southern Hemisphere retailer, we are able to leverage our scale and global sourcing strategy to deliver quality products at competitive prices for our customers,” he said.

The food division saw sales go up 12.1% and operating profit up by 17.6%. “The supermarket strategy is proving successful and Christmas sales were strong,” the company said.

David Jones had a strong first half performance with improved merchandising and the expansion of the group’s private label brands across the chain, Woolworths said.

The directors declared an interim cash dividend of 133.0 cents per share, which is an increase of 37.8% on the same period last year.

Woolworths said economic conditions are expected to become tougher, particularly in South Africa where interest rates are also likely to increase.

“Trading for the first six weeks in the second half of the financial year has however remained robust,” it said.

Woolworths said return on equity increased by 24.6%, while adjusted profit before tax went up by 16.5% to R3.4bn.

It expects its clothing and general merchandise price movement to increase by 8 to 9% for the 2016 financial year, with food price movement up by 6 to 7%.