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Woolworths is preparing to battle the impact of soaring inflation in both its key markets, after increased sales allowed the South African retailer to raise the annual dividend higher than expected.
While a jump in prices is a global risk, Woolworths said the company’s Australian department-store business “should be somewhat mitigated by strong household balance sheets and high employment.”
South Africa may be a bigger challenge, it said, as “consumption faces high unemployment and severe energy shortages.”
Woolworths will distribute 149 South African cents a share, the Cape Town-based company said in a full-year earnings statement Wednesday, beating estimates. Total sales rose 1,7 percent.
The shares jumped 6,6 percent in early trade in Johannesburg, the most in almost five months, extending the year’s gain to 8 percent.
The group’s flagship South African food business, which contributes about half of revenue, increased sales, although the pace of growth slowed from a year earlier as competition for the wallets of the wealthiest shoppers escalated. Profit margins in the food division narrowed by 50 basis points to 24 percent.
A year ago, Zyda Rylands retired as the CEO of Woolworths South Africa to head the food unit. She’s focused on making price reductions, which narrowed gross margins but helped maintain earnings growth.
Online food sales climbed 45 perce acnt, albeit still contributing just 3,2 percent to the South African business. The gain was helped by an expanded on-demand delivery service, Woolies Dash, that has started to challenge Shoprite’s Checkers Sixty60 one-hour grocery delivery app. – Bloomberg.
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