Woolworths outshines competitors

RETAILER NEWS

IOL Business - Aug 5th, 10:25

A surge in Woolworths’ sales, which bucked the weaker sales growth trend of ailing local retailers, was because the food and fashion retailer was not dependent on credit like its competitors, analysts have said.  

In a trading update released in July 2013 Woolworths said sales for the 53 weeks to June 30 rose by 23.2 percent from the 52 weeks to June 24, 2012.

Retailers such as Shoprite and Massmart have been affected by a slowdown in consumer spending, while analysts say that Woolworths’ foreign operations and non-credit business have kept the company ahead of the pack.

Woolworths bought Australian fashion brand Witchery in August 2012 and Country Road, which is listed in Australia, in 1998.

36One Asset Management analyst Daniel Isaacs said Woolworths’ Australian businesses had set it apart from most retailers.

Statistics SA data has shown that textile, clothing, footwear and leather goods were the biggest contributor to a rise in retail sales in May.

According to Isaacs, Woolworths’ credit offering is not aggressively marketed because it is not core to the business.

“They do offer credit but they are not growing it aggressively,” Isaacs said. “They’re not driving sales with credit like Foschini, for instance.”

Absa Investments analyst Chris Gilmour said that Woolworths had an extremely clean book helped by cash clients.

“They are very selective in granting credit and their business is very well managed.

“Of course, compared to last year the market is a bit different, with the pullback in unsecured loans, but Woolworths wasn’t effected by that much because they’re mainly a cash business.”

Gilmour said it was difficult to compare Woolworths to other retailers as it was a hybrid outlet but it was clear that it was ahead of the pack.

He added that Woolworths was in a league of its own when it came to capturing the emerging middle class.

Isaacs also remarked that inflation within Woolworths could assist to increase top line growth. Earlier this year, Woolworths trading updates were described as “sterling” after sales rose 18 percent in the 26 weeks to December.

Woolworths share price closed 0.25 percent up at R65.10 on the JSE in mid-July. © Independent On-line 2013. All rights reserved.