Retailer Woolworths said Thursday 19 that trading conditions across the company continues to be affected by COVID-19, with store traffic, especially in large shopping centres, central business district and airport locations, at significantly reduced levels than the period before.
In South Africa, COVID-19 restrictions were lifted to level 2 from 17th August and to level 1 from 21st September, which effectively eliminated most remaining restrictions on trade.
“However, whilst the National State of Disaster remains in place, economic recovery is slow and consumer confidence remains low,” the group said.
Consequently, sales for the first 20 weeks of the 2021 fiscal year rose by just 3.5% compared to the 20 weeks ended 17 Nov. 2019, and dropped by 2.0% in constant currency terms.
Recovery in Australia has been hindered by the imposition of the stage 4 lockdown in the State of Victoria from 6 August to 28 October, resulting in abrupt store closures.
“Inventory levels remain well managed, assisted by the ongoing shift to online across all businesses, however the pandemic continues to disrupt supply chains both locally and globally, which we are monitoring and managing carefully.
“Group cash flow remains positive and net debt levels have continued to decline in both South Africa and Australia.
Additionally, the various initiatives underway to ensure a more sustainable funding structure of our Australian entities are progressing well,” Woolworths said.
In South Africa, Woolworths Food remained tough throughout the reporting period, advancing its positive momentum with volume growth as well as market share gains, despite trade restrictions and disruptions from temporary coronavirus related store closures.
Sales grew by 9.0% and by 10.6% in comparable stores, with net space growth of 1.4%. Price shifting of 7.1% was affected by mix, with reduced demand for snacking and lunchtime products and customers choosing for larger pack sizes, Woolworths said.
Underlying product inflation averaged 4.7% over the period, the group said.
The company said that price movement will be ‘tempered’ from now on, through a planned price investment plan, which will see Woolworths invest R1 billion in its prices over the next 2 to 3 years in a move to make its products ‘more accessible to more customers.
This will constitute a R250 million into pricing for its fashion business, and R750 million investment for its foods business. The initial phase of this journey starts with a R250 million price investment planned in the Foods business and R250 million in the Fashion business for this fiscal year.
The investment is being centered on the most popular Woolworths products. In Foods, this includes the whole fresh chicken like whole and portion chicken packs, excluding crumbed, marinated chicken and Easy to Cook.
“While this investment will initially be most visible in our poultry products, we have also applied more promotions on everyday basics across groceries, household and personal care to be more affordable to more customers,” the group said in October.
In fashion business, the investment will be in chosen key wardrobe essentials.
Woolworths stated that its Fashion, Home and Beauty division continued to be affected by the constrained environment.
The winter clearance sale was quite smaller than the period before, and together with a significant fall in demand for formal wear, negatively affected sales growth for the period, which fell by 14.6%.
Comparable store sales were additionally 14.6% lower on a 1.9% price movement, whereas net space dropped by 0.5%.
“The launch of summer ranges, together with the earlier commencement of our Black Friday promotions, has resulted in positive sales growth in the last three weeks of the period,” Woolworths stated.