South Africa's Woolworths shares rise on sales turnaround

South African department chain Woolworths said on Thursday it had turned around its fashion, beauty and home business after fixing poor product choices in clothing, which had weighed on its sales the previous year.

Woolworths shares jumped more than 8% to a 6-1/2-month high after it said sales in its fashion, beauty and home business in the 52-weeks to the end of June rose 1.5% “as a result of a focus on core ranges and basics, backed by improved availability”.

Basic ranges at Woolworth include classic knitwear which is priced from 250 rand ($17.95) to 1,299 rand and jeans selling for between 450 rand and 699 rand.
Woolworths South Africa, which also trades in 11 countries in sub-Saharan Africa, accounts for 71.1% of operating profit.

Sales at Woolworths, which also has a presence in Australia and New Zealand, fell by 1.5% in previous year in the fashion, beauty and home business as its womenswear modern range failed to resonate with its core customers.

In February, Chief Executive Ian Moir said Woolworths would focus on getting back to “beautiful basic” items in South Africa to appeal to its core customers, who are not looking for items which are either too fashionable or too youthful.

Woolworths said group sales for the comparable 52-weeks rose 3.9% and by 5.9% in the 53-weeks ended June, while food sales grew 7.7%, driven by further investment in price, innovation and convenience, resulting in continued volume growth, it added.

The year ended June 2019 had 53 trading weeks compared to 52 trading weeks for the year ended 24 June 2018.

In Australia, where retail trading conditions remain challenging, David Jones was also significantly impacted by sales disruption from the Elizabeth Street store refurbishment, with online sales jumping 46.8%, Woolworths said.

The group’s year-end results are due on Aug. 29.