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The Woolworths group is clear on what mistakes were made during the past financial year, but it says it also knows how to fix these, Woolworths Holdings [JSE:WHL] group CEO Ian Moir told Fin24 on Thursday.
"We have been very honest with ourselves and with the market," said Moir.
Woolworths Holdings announced its results for the financial year ended June 24, 2018 on Thursday. Group sales increased by 1.6% to R75.5bn. Adjusted pre-tax profit was down 13.8% to R4.8bn.
The results were especially impacted by an impairment relating to its David Jones department store in Australia.
The group's headline earnings per share (HEPS) - excluding the David Jones impairment of A$712.5m as well as last year’s A$172.6m profit on the sale of the David Jones Market Street property - decreased by 17.7% to 346.3 cents per share. Earnings per share (EPS), which includes both the impairment charge and last year’s property sale, decreased by 165.2% to -269.5cps.
Moir pointed out that the group did not make a trading loss.
"We are coming through this disappointing period. Last year was horrendous, but it was due to transforming our Australian market. We put in a lot of work and effort and now we are coming through and have complete teams in place in new headquarters there," he said.
"The Australian business is coming through and outperforming the market. I am not saying we are through it. There is still much to do."
In his view, 2020 will be the year when the group will see the full transformation in Australia completed and reap the benefit of exclusive deals with the best global brands.
Department store concept
Contrary to the view of some analysts, Moir's view is that the department store concept is certainly not dead.
He admits that on the SA fashion side Woolworths "did not do a good job" in the women's wear sector during the financial year.
"We went too young with our offering, but now we have fixed that and offer a much more commercial product for our target customers. We went back to basics and see green shoots from this approach," he said.
He said in the food business in SA the group's target market is predominantly LSM 9 and 10, while on the clothing side it is aimed at LSMs 6 to 10. The age profile is everything from baby wear to those of 65+
"We understand our customers. The consumer in SA is more constrained regarding debt and has less available to spend. It creates a tougher market. That is why the most important key to our approach is to have great basic items which are well made," said Moir.
Another local trend is the increased desire among consumers for items related to well-being and convenience.
"Woolworths is an iconic brand in SA, well-loved and desired. Our foods business is performing well. The fashion side needs some fixing, but we are onto that," he said.
"As for our Australian business, we just need to keep the momentum going and our strong brands are outperforming the market. The full opportunities of David Jones must now come to fruition."
By close of trade on Thursday Woolworths shares were down 1.84% at R50.60.
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