Woolies warns of bad debts

But the company said its provision for bad debt rose as higher interest rates made for a tougher debt collection environment, and its shares fell.

"If they come in on the lower side of that (earnings) guidance, it will be disappointing," Renaissance Asset Management head of research, Nothando Ndebele, said, adding growth in bad debts was concerning and was eroding profit.

Headline EPS is the key profit measure for South African firms and excludes certain non-trading, capital and extraordinary items.

Woolworths said its net bad debt provision, as a percentage of its gross book, increased to 7.0% in the year to end June from 5.5% in the previous financial year.

South African retail companies have benefited from buoyant consumer confidence stoked by a growing black middle class and tax cuts but analysts are concerned a string of interest rate hikes from the middle of last year could curb growth.

At 09:45, shares in Woolworths were trading 1.22% lower at R21.92, while the blue chip top-40 index was 0.68% weaker.

The group said sales for the 52 weeks to end-June increased 22.3% with food sales showing the biggest increase. Comparable stores sales increased by 15.1%.

Food sales rose by 25.6% in total, and by 15.1% on a comparable stores basis.

Ndebele said there were strong sales numbers coming through at its clothing unit and said higher food prices had helped boost revenues at its food unit.

Its Australian unit Country Road, which only accounts for a small part of Woolworths? total revenues, boosted total sales by 15.9% in Australian dollar terms and by 12.6% in comparable sales when viewed against the previous year.

Woolworths said it expected to release full-year results on August 23.