Woolworths has reported a drop in profit for the first half of its financial year, even as sales continued to rise across its main businesses.
In results for the six months ended December 28, the retailer revealed that turnover and concession sales increased by 5.4% to R42.5-billion. Turnover alone increased by 5.2% to R41.6-billion, supported by growth in both its South African and Australian operations.
However, profit before tax sharply dropped by 23% to R2-billion.
Woolworths said the company’s turnover compared to last year was affected by a once-off gains in the previous period, including profit from the sale of a property.
Despite the improvement in sales, Woolworths said gross profit margins came under pressure, highlighting targeted price reductions, stronger growth in lower-margin channels such as online, and higher promotional activity to clear excess stock.
Tough trading conditions
Trading conditions remained challenging as consumer spending remained subdued even though inflation and interest rates have eased in South Africa.
At Woollies in Australia, heavy discounting and high operating costs continued to weigh on retail activity. However, the group managed to contain expenses, allowing adjusted operating profit to increase modestly.
Woolworths South Africa delivered turnover and concession sales growth of 6.8% for the period. The food division remained a key driver, with sales rising 7%, or 5.2% on a comparable-store basis.
Online sales growth
Online sales through Woolies Dash grew by 23%, accounting for 7.2% of South African food sales. Adjusted operating profit in food increased 3.5% to R1.78-billion.
According to the group, investment in expanding the Midrand distribution centre and the growing contribution of online sales put some pressure on margins.
The Fashion, Beauty and Home (FBH) business recorded sales growth of 6.2%, assisted by better product availability and improved trading over Black Friday and the festive season.
Adjusted operating profit in this segment increased by 1% to R771-million, although its gross profit margin declined as the group cleared older stock and invested in price.
In Australia, Country Road Group increased sales by 2.3%, but performance softened in December amid weaker consumer confidence. Higher promotional activity also reduced margins, though adjusted operating profit improved slightly in Australian dollar terms.
Dividend declared
Despite the fall in headline profit, the board declared an interim dividend of R1.18 per share, up 10.3% from the previous year. The dividend will be paid on March 30, 2026.
Net borrowings increased to R5.8-billion by the end of the period, but the group said its balance sheet remains within its targeted gearing levels, with a net debt to EBITDA ratio of 1.48 times.
Woolworths said early signs of recovery are emerging in South Africa but warned that inflationary pressures and higher interest rates in Australia could continue to dampen consumer spending. Ongoing global uncertainty may also affect trading conditions.
