Woolworths impresses with profit

Johannesburg - Retailer Woolworths Holdings [JSE:WHL] slightly beat forecasts with a 24.2% rise in full-year profit on Thursday, helped by share buy backs and resilient demand for its upscale grocery products.

Woolworths, which also sells clothes in South Africa and Australia, said diluted headline earnings per share totalled 260.6 cents, beating a 258.7 cents estimate in a Reuters poll of 12 analysts.

Consumer spending is improving in Africa’s biggest economy due to decades-low interest rates and above-inflation wage hikes, but the outlook is uncertain against the backdrop of high debt levels and chronic unemployment.

South African retail sales jumped 8.3% year-on-year in May, official data showed, beating the 4.7% growth economists had expected.

Woolworths, similar in style and products to Britain’s Marks and Spencer Group, said it bought back shares worth R286m during the year. The company also bought back R358m shares to settle employee schemes.

The Cape Town-based company said sales increased 12% to R28.6bn with its grocery unit lifting sales by a similar margin.

Shares in Woolworths are up about 44% so far this year, reflecting a buying frenzy across the sector on expectations of healthy returns from its expansion drive into the rest of the continent.

The company gave an upbeat outlook for both its South African and Australian operations.

“We expect the upper-end of the market to remain resilient whilst the economy as whole remains subdued,” it said in a statement referring to the South African market.