South Africa: Dated and pricey Woolworths clothes a drag on sales
Retailer Woolworths failed to make a fashionable impression on South African consumers on Black Friday.
Woolworths made the admission in its interim results for the 26 weeks to 29 December 2019.
South African retailers have borrowed from the American playbook by implementing their own equivalent of Black Friday. Since its introduction in South Africa, Black Friday has given retailers a much needed sales boost ahead of the start of the festive season, which runs throughout December.
- “Our Black Friday performance was disappointing due to underparticipation. Womenswear underperformed as a result of some product failure, a lack of newness in summer and higher price points, which also impacted sales and volumes,” conceded Woolworths.
Coronavirus danger Down Under
On the opposite end of the Southern Hemisphere, bushfires curtailed footfall in Australia and the coronavirus (COVID-19) looms as a threat to sales and sourcing, according to the retailer’s assessment.
- It plans to counter this by ramping up online as a key sales channel.
- The company is working on a mitigation plan to deal with sourcing challenges that might arise because of trade restrictions caused by the coronavirus.
The David Jones brand performed better because the Elizabeth Street store is nearing completion in March 2020. David Jones also surprised by gaining moderate market share.
But Country Road sales pitched in lower and recorded a 2.5% decline.
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The South African food business remained resilient and generated near double-digit growth for the period under review, while Woolworths Financial Services’ book grew 8.3%. In the 26 weeks ended 29 December 2019,
- The group generated R40.9bn ($2.61bn) in turnover and concession sales; and,
- Group earnings per share and headline earnings per share dropped 9% and 10.1% respectively.
Better clothing and pricing to improve prospects
The three factors that affected the retailer the most in its home market, South Africa, were uncharacteristically bad weather, a tight economic context, made worse by power outages that affected trade adversely, and poor performance of its clothing.
This resulted in Woolworths experiencing “slower” December sales.
Woolworths remains concerned about the economic pressures faced by South Africa consumers and power cuts. The retailer has resolved to come up with better pricing and ranges for its fashion, beauty, and home offerings.
- The retailer was not too worried about its food division, which “is expected to continue to trade ahead of the market”.
- In Australia, Woolworths expects lower consumer spending in the short-term because “stagnant wage growth and the impact of the bushfires”.