South African retailer Woolworths Holdings on Thursday posted its first annual profit fall since 2009 and warned of continuing tough trading conditions at home and in Australia.
Recession and political turmoil hit consumer spending in South Africa while Woolworths has faced increased competition in Australia from the likes of H&M and Amazon.
“It’s going to continue to be tough, we are under no illusions about that,” CEO Ian Moir said in a presentation in Cape Town, adding that medium-term targets had been reduced.
“We are in a storm of change, the customer is changing, technology is changing … our markets are very tough places indeed.”
The company’s Johannesburg-listed shares were down 4.6% at 08:11 GMT, against a 1.2% decline for the general retailers index
Woolworths, which sells groceries, food and homeware, said that headline earnings per share — the main gauge of profit in South Africa — fell by 7.6% to 421 cents in the year to June 25. That compared with a consensus forecast of a 6 percent fall in a Reuters poll of 12 analysts.
It declared a final dividend of 180 cents, bringing the total shareholder payout for the year to 313 cents, which was flat on last year.
Clothing and general merchandise sales inched up by 1.4%, but gross profit margins for the division dropped by 48% on higher markdowns and a weak sales environment.
Moir said that margins will continue the downward trend in the medium term.
Woolworths aims to counter the market conditions with a structural shake-up aimed at reducing costs and increasing margins, including moving the headquarters of its David Jones clothing brand to Melbourne from Sydney and strengthening its beauty products offering.
“Our view is you either accept [the change in the market], change your model, change your experience, change your approach for the customer or you will whither and die — and we are not going to whither and die,” Moir said.
In South Africa Woolworths also faces increasing competition from Africa’s biggest grocer Shoprite, which is now targeting wealthier customers as the recession hits lower-income consumers.