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David Jones drags Woolworths into net loss

Food does particularly well, and the senior womenswear mistake is being remedied, says Woolworths CEO Ian Moir.

NASTASSIA ARENDSE:  Woolworths cut its interim dividend by 18% to 108.5c, with a 6.9 billion impairment of its Australian department store chain David Jones dragging the retailer into a net loss of R4.86 billion.

This is Ian Moir, group CEO of Woolworths.

IAN MOIR:  It actually doesn’t affect the headline earnings per share, which were down by 15% – that’s due to other reasons. But it does affect, obviously, the total earnings per share, which were well down on the prior year. And the write-down is the write-down of goodwill, so it’s a non-cash based item, and it’s just reflecting our view on the future cash flow as the economic cycle, and some of the things we got wrong within David Jones. But it doesn’t affect our view on the business, it doesn’t affect the fact that we believe we are doing absolutely the right things to make sure David Jones works much better in the future and delivers really what the customer is looking for. And it doesn’t mean that we’ve pulled back on our capital investment. We are investing in stores, in systems, new product, better experience within that business and will continue to do so.

NASTASSIA ARENDSE:  Locally here in South Africa, what picture do these figures paint for Woolies?

IAN MOIR:  I think a mixed bag. We’ve a really good result in the food business – significant top-line growth, in fact the best in the market. We took market share from our competition – in fact we’ve done it every month for about seven years. So it’s a good-performing business, very profitable, resonating with the customer. We continue to build that business and hopefully we’ll see more of the same going forward. We are not complacent at all, but we were pleased with the performance of that business.

Within the clothing business we are less pleased. We made a mistake and disappointed our senior customer. We think it’s really womenswear that’s driven a below-market result and within womenswear it’s one of our brand additions, but it’s a big brand. It’s meant to talk to the 35- to 55-year-old senior customer who’s looking for modern, wearable fashion. We didn’t get it right. It was too fashionable, it was too young. We’ve recognised that, we are fixing it and going forward the customer can expect something that they are really looking for from Woolies. We’ll get that business back on track.

NASTASSIA ARENDSE:  What exactly is the outlook that Woolworths is looking to throughout the rest of this 2018 year?

IAN MOIR:  Myself and my team are very bullish. In the South African environment, I think since Cyril Ramaphosa has come in, we are seeing a quite different world. We are seeing a whole country that’s looking up, not down. We are seeing a whole country that can see where it’s going, that’s focused on growth, fixing the ills of the past, dealing with the big issues around unemployment and education, being fiscally responsible with the budget yesterday, and stamping on corruption. So I think for us as a business, and more importantly for our customers, there will be more confidence coming back in. And with more confidence will come increased spending. It’s not going to happen overnight, it will take time. But we are confident.

Read: Woolworths pins its hopes on the Ramaphosa effect

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