HANNA BARRY: Clothing and food retailer Woolworths reported interim results for the six months to December. Sales up more than 55% to around R30bn, thanks largely to the acquisition of Australia retailer David Jones. Headline earnings up and operating profits up more than 44% to R3bn. Woolies food is still looking as strong as ever – its sales growth of 14% well ahead of the market’s 8%.
Ian Moir is Woolworths’ CEO and joins us now. Ian, thank you for your time. That R21bn acquisition of David Jones was described as outrageously high by some analysts when it took place last year, but it does seem to have paid off in these results.
IAN MOIR: Well, it did Hanna, but we were always clear that we’d bought the right business at the right time and at a fair price. We’ve got a lot to do with that business and we’ve always said we could improve the revenues by around $130m per annum within a five-year time frame. We’ve been there six months now and we are confident of over-achieving that, and perhaps doing it in a shorter time frame. This was a strategic move for the business that we are confident was right.
HANNA BARRY: A number of European retailers have entered the South African market in recent times. Topshop, Zara, River Island are some of the big names. And of course this year Swedish clothing brand H&M is expected to set up shop here. Is Woolworths’ clothing and general merchandise coming under more pressure from this type of competition?
IAN MOIR: Without a doubt. I think the whole market is changing, and that was the principal reason that we made this strategic move. What we are experiencing in South Africa is we are seeing more of in Australia – Zara and H&M are getting very big in that market and we believe that in order to be successful and in order to be a real player in the retail market in Australia and in South Africa over the next five years you have to have scale and that was what this acquisition was all about.
HANNA BARRY: In terms of just the sales in that division, clothing in general, merchandise, those were up 8%. Are you satisfied with that?
IAN MOIR: No, I am a miserable Scot by nature and I’m not really satisfied with much. We could have done better. It was above market growth, which is always great, but I think we left some on the table. We can and have improved our kids’ wear offer. We had a great December, the best December we’ve had both from a clothing and a foods perspective in years. I think some of the changes were effective and some of the lessons we’ve learned are showing up in our sales for December/January. We have a new MD of clothing, and he’s performing well and I’m more confident of the future than I have been for a long time in clothing.
HANNA BARRY: You talk about that future. There’s quite a lot of negativity in South Africa at the moment, I think fuelled largely by a fresh bout of load-shedding. As a retailer across the country is Woolworths bullish on its future prospects in South Africa, or is it increasingly investing in foreign markets?
IAN MOIR: Well, I guess we’ve obviously invested materially in a foreign market. We are a very diverse company and I think spreading your risk is a good thing. We have got diversity over the product categories we offer, we’ve got diversity over the geographies we operate in, and we’ve diversity over the brands we operate within our stable. So that I think de-risks our business. We can see the benefit of it now in our results. We might have had a miss in a couple of areas, but we’ve had other areas that have really performed exceptionally well. And the result the group as a whole has a great result.
But we are still very confident in the South African market. We continue to invest materially in the South African market. We increased our food space by 10% in the last six months, and our clothing space by 6.5%, and we invested heavily in our distribution centre. So we are very confident about South Africa and we will continue with that belief and that investment.
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