Roy Bagattini takes Woolworths helm as profit slides

Continued load shedding, the weak SA economy and concerns around the impact of Coronavirus present risks for full year outlook.
Roy Bagattini: Woolworths new CEO who took the helm from Ian Moir as of February 17. Image: Supplied

New Woolworths CEO Roy Enzo Bagattini has his work cut out for him.

The group posted a downbeat set of results on Thursday with a double-digit slide in overall profit for its half-year to December, which saw its share price close almost 4.5% down on the day.

Adjusted profit before tax fell by 12.3% to R2.4 billion for the 26 weeks to December 29, excluding the impact of IFRS accounting changes. The decline in profit saw the group cutting its half-year dividend by 3.3% to 89c, while headline earnings per share declined 10.1% to 180.2 cents per share (excluding the impact of IFRS).

Customers enter the Woolworths V&A Waterfront store in Cape Town. Image: Halden Krog/Bloomberg

The results release comes just days after Bagattini took over the hot seat from Ian Moir. Bagattini jetted into Cape Town on Monday from the US and on Thursday had to face investors and retail analysts at the group’s interim results presentation at Century City.

Read:
Bye bye Ian Moir
Rating Ian Moir’s decade at Woolies

Moir, however, was by Bagattini’s side at the event and made his last results presentation as Group CEO after ten years at the helm. For the interim, Moir will be staying on at Woolworths as acting CEO of its David Jones Australian business.

While Woolworths warned the market in a trading update in January of a fall in peak November and December season sales, results announcement on Thursday presented a dim full-year outlook, with headwinds expected in both its South African home market and in Australia.

Coronavirus concerns

In addition to consumers remaining under pressure from a weak economy and “continued power outages” in South Africa, Woolworths warned of sourcing risks linked to the Coronavirus outbreak in China.

“The Coronavirus is significantly impacting tourism, footfall and sales in Australia. A further impact on sourcing is also expected across the group. The group is currently actively considering ways to mitigate the risks associated with the Coronavirus,” it noted.

Meanwhile it said that in Australia, consumer spending is likely to be muted in the short-term due to stagnant wage growth and the impact of the bushfires. “The heightened levels of competition and promotional activity is expected to continue,” it added.

With operating profit for the interim period decreasing by 8.9% to R834 million within Woolworths’ Fashion, Beauty and Home business, the group said that it will focus on improving performance through better pricing and ranges, particularly in womenswear.

Black Friday sales was “disappointing” due to “under-participation”, according to the group. “Womenswear underperformed as a result of some product failure, a lack of newness in summer and higher price points, which also impacted sales and volumes.

“The constrained economic environment, exacerbated by the disruption to trade caused by power outages, unseasonal weather in parts of the country and an underperformance in clothing led to a slower second quarter,” it added.

The star performer for Woolworths was its food division yet again, with operating profit increasing by 8% to R1 157 million, for the interim period. Woolworths said food is expected to continue to trade ahead of the market.

At the David Jones business in Australia, the group anticipates benefiting from the completion of its Elizabeth Street store refurbishment, with trade normalising.

Speaking briefly to Moneyweb, Bagattini said he would spend the next few months evaluating and immersing himself in the business, to get a clearer perspective of Woolworths’ challenges and opportunities.

“Obviously, David Jones is not just topical but there are challenges there…. However, I believe that disruption in that business will set it on the right path. I will also be looking to really immerse myself in the core South African business,” he said.

“It is interesting times for Woolworths, but we have to focus on the things we can control to ensure the group is ahead of its competitors….” Bagattini said.

“The group is really iconic and is made up of powerful brands. Clearly there are parts that are working well and some parts that are below where it should be. I will initially primarily focus on two to three big areas, for example getting David Jones right and on the SA fashion business,” he noted

Read: TFG outshines its SA retail peers overseas

Listen: Independent analyst Chris Gilmour discusses Woolworths’ and Truworths’ fall in profits, with Nompu Siziba

AUTHOR PROFILE

COMMENTS   11

Sort by:
  • Oldest first
  • Newest first
  • Top voted

You must be signed in and an Insider Gold subscriber to comment.

SUBSCRIBE NOW SIGN IN

I am so tired of hearing about Woolworths’ self-inflicted troubles. The purchase of David Jones and the price paid needs investigation. It smacks of corporate capture. Someone made a bundle and that someone is now living it up…. and shareholders have to be patient. Really! What ever happened to corporate responsibility?

It’s more a migration to Australia than else. Corporates are moving money.

They took a chance

Spot on JDFourie!
Ian Moir tried to justify the DJ’s disastrous purchase by destroying Woolies great clothing brands in RSA with the substitution of unpopular DJ products. I bet you that he will be gone with a golden handshake whereas my shares will still remain at half-mast!
Irrespective, he did not do this alone and the Board of Directors should be taken to task. Too many PIPs, noddies and corporate back scratchers and too little common sense at that level.

Woolies used to be the place for fairly priced, good quality clothes. They have lost that market to Pep and Ackermans. Their food division is mostly held up by snobbish upmarket ladies, while Superspar and P&P food division is better and offers more variety.The following comparisons refer.
5year price present price
Woolies 102.92 42.40
SHP 179.00 136.00
P&p 40.00 40.00
Spar 179.00 173.00
There has been a large drop over the last year due to the veconomy shrinking.

Bring back Woolies men’s chinos made in South Africa (they fit better) and Woolies blueberry and apple lattice pie (one of the best tasting food items on shelves in days gone by). In short: Bring back the old Woolies that made you successful in the first place!

Loadshedding, weak economy, too much competition.PnP,Checkers,Food lovers market,Ok,U save,Spar,and the list goes on.The world is saturated with things.
Maybe we should have anout 4 black fridays a year.Drop the prices, give specials, sell the products, even if your profit is smaller, at least u can get rid of it.

I am sure its a relief that the error strewn and self serving Ian Moir has gone,probably leaving behind a toxic environment .A legacy of the wrong sort also left behind.Word on the street is that the new guy only knows about jeans and may have limited experience in the extremely profitable foods division.Some fun and games ahead

consequence of a weak shareholder base that should have acted years ago. Allan Gray had WHL at the AG conference last year as one of the house top picks. Moir should have been dismissed.

Moir’s decision to expose Woolworths to the Australian market was another disastrous South African attempt to internationalise, not unlike the Old Mutual fiasco.
During that period the local company, certainly in the area I live in, has had more than its fair share of stock outages that have made shopping for me at Woolies so frustrating that I avoid it at much as possible.
Compared with its hey day successes it certainly seems to have lost its edge.

Aggrieved customer received no thanks
I suggested that WW introduce a drive through service to customers.

I made my suggestion to Woolworths on late March/2 April and they have now introduced a drive through service! However they have given me no recognition for my suggestion and this is disappointing and underhanded to say the least. If WW runs with my suggestion I should receive recognition or reward from a retailer such as WW that pretends to take pride in customers.

It is faster and safer during these times and sustainable for future customer service. Any goods and essential goods can be packaged on combo deals to customers and paid and collected as is done with the fast food stores without having to leave the safety of vehicle and children remain in the vehicle.
Customers should have the option to order either online or directly at the drive through on a display-board to order and collect etc. should not even need to have cars parked as is the case now with WW introduction of drive through.

Looking forward to your decent favorable response.

End of comments.

LATEST CURRENCIES  

USD / ZAR
GBP / ZAR
EUR / ZAR
BTC / USD

Subscribe to our mailing list

* indicates required
Moneyweb newsletters

Instrument Details  

You do not have any portfolios, please create one here.
You do not have an alert portfolio, please create one here.
INSIDER SUBSCRIPTION APP VIDEOS RADIO / LISTEN LIVE SHOP OFFERS WEBINARS NEWSLETTERS TRENDING

Follow us:

Search Articles:
Click a Company: