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Woolworths Holdings Limited is an investment holding company and one of the top 100 companies listed on the Johannesburg Securities Exchange. Its core business focus is the provision of retail and financial services to upper and middle income groups mainly in South Africa but also in Africa, Australia and New Zealand.
Turnover: R 25.582bn Trading Profit: R 2.122bn Trading Margin: 8.29%
Stores: 637 Trading Space: 585,190m2 Employees: 24,649
Listed: Yes HEPS: 214.90 cents
Click the headings above to view an extended report for the past 5 years


Woolworths was founded by Max Sonnenberg in 1931 officially opening the doors of the first store in Adderley Street, Cape Town on October 31st. His belief that success lay in providing customers with superior quality merchandise at reasonable prices has been instrumental in establishing Woolworths as one of South Africa’s leading retail chains.

Today, Woolworths is a South African retail chain that extends, through franchise partnerships, throughout Africa and into the Middle East, trading through more than 400 stores. Woolworths Holdings influence also extends to Australia with a majority share in the Australian retail chain, Country Road.


Our strategic intent considers four areas of focus: our customers, our operations, our people and our good business journey.

The Group undertakes an integrated approach to strategy and business planning, which aligns the strategy, the medium-term plan, and the operating plan and ensures that key targets are cascaded throughout the organisation.

Strategic objectives:
• To be a customer -centric business
A significant amount of work has been done to define who the Woolworths customers of the future are and to identify what is important to them. We have defined a single businesswide
view of the Woolworths customer, based on the customer’s mindset, wants and needs as informed by lifestyle segments. Customer segmentation and shopping habit information is integrated into our merchandise cycle and informs our branding, design, buying and allocation decisions.
• To be a brand value -driven business
We have modernised our branding, and for each of our sub-brands, we have challenged
their purpose and alignment to the main Woolworths brand. Our plans are to ensure that our brand and its values are understood throughout the organisation and that those values are ingrained, both in our products, and in our service in stores: delivering Value with Values to make the Woolworths Difference.
• To build strong profitable customer relationships
Our WRewards loyalty programme was launched in September 2010 and has significantly
exceeded our expectations, driving card acquisition and increased card spending. Customers are delighted with the instant savings offered by our loyalty programme. WRewards remains our key strategy to increase the lifetime value of our customers – enabling us to reward loyalty and gather information to further understand customer needs and align our total customer proposition.
• To get our formats right
We need to ensure that our products andmstores best meet the needs of the Woolworths
shopper. To address this demand we have defined a format strategy across both Food and
Clothing and General merchandise that defines location, space, range and service principles, based on our target customer. In Food, the most significant part of this intent is to enlarge existing stores to support our supermarket and regional centre concepts. We will however continue to roll out our smaller format stores to support customer convenience.
Our first supermarket (in Nicholway, Johannesburg) is planned to open in April 2012. At 2 500 m2, the store will be significantly bigger than any of our existing ones and will offer not only extended ranges, but an extended in-store experience.
• To grow our product dominance Clothing and General merchandise
Great progress has been made in creating dominant headquarters assortments underpinned by “The Difference”. The focus on Womens’ footwear and accessories, Lingerie and Babyworld has resulted in significant market share gains. The re-launch of our Re: and studio.w subbrands has been extremely successful, attracting a younger and more modern customer. Our plans are to continue to deliver product leadership in terms of quality and innovation throughout our ranges, delivering on-trend fashion at value, beautiful basics and reaffirming Woolworths as the market leader for innovation in comfort, convenience, safety and protection and sustainability.
Our Food business is synonymous with quality and innovation and we have greatly improved
our value perception. Our Value with Values positioning in Food has been well-received by our customers where we have gained market share. To support our larger format strategy, we are expanding our ranges to enable our customers to complete their main shop, introducing larger pack sizes and new categories. Our branded Key Value Item (KVI) range will also be extended.
• To enable a multi -channel world
Our business and brand is well-positioned to take a leading role in the trend towards multichannel retailing. In the last year we have invested significantly in upgrading our internet shopping site. Our plans are to optimise and further expand our online offering in terms of products, information, services and delivery options. We will develop social commerce platforms integrating our social media marketing for the convenience of our customers.

Strategic objectives:
• To expand our footprint in Africa
Our plans are to materially grow our presence in Africa. The focus will be on expanding our
presence in existing countries of operation, whilst establishing a presence in Nigeria, Angola and Mauritius. We will open 19 stores in 2012 and have a target of more than 100 stores by 2014. We intend to integrate the international business into our existing processes to build a sustainable supply chain and to ensure consistent costeffective availability.
• To lower the cost of doing business
Our plan is to ensure that each business unit understands its “cost-to-sell ratio” and develops a sustainable plan to improve productivity. As part of these plans we will focus on addressing underperforming stores and improving the profitability of underperforming merchandise groups. We will also extend best practices in non-trade procurement more widely in the company to drive further cost-savings.
• To simplify our business model
A key business decision made last year was to re-acquire our franchise stores. The franchise business model added costs and complexity as well as a lack of consistency in the way our brand was experienced by the customer. At this point, approximately 75% of our South African franchise stores (measured by turnover) have been re-acquired.
• To improve our availability
Our intent is to continually improve availability in a sustainable manner, enabling customers
to shop with confidence. We will continue to invest in improved systems and processes to
improve availability. In Food, we will fine-tune our store catalogues and in Clothing and General merchandise we are improving our speed of inventory movement through the supply chain, optimising our allocations and improving our size profiling.
• To improve our sourcing capability
We have spent a significant amount of time and effort optimising our value chain across the business to drive higher margins. In Clothing and General merchandise we have increasingly moved from import agents to dealing directly with foreign manufacturers. At the same time we have rationalised the number of suppliers with the top 30 now accounting for over 70% of our business. These initiatives have resulted in significant margin gains. We have shortened our merchandise cycle by eight weeks – a major improvement. We have set up an office in Shanghai that will be used for sourcing, technical integration, production
management, product development support and monitoring quality standards for Clothing and General merchandise. We will continue to drive down the number of weeks in the merchandise cycle, allowing us to reduce the risk in the fashion business and bring fashion trends to customers earlier and with more confidence. Fast response mechanisms have also been built into the cycle for certain merchandise categories.

Strategic objectives:
Our strategic intent is to establish a leading Employee Value Proposition that will attract,
engage and retain our best talent and ensure our people are inspired and committed to the
company vision and strategic plan.
• Establish a non-negotiable commitment to EE
Establish a non-negotiable commitment to transformation and BEE by focusing on EE transformation through focused sourcing and retention, talent identification and the development and promotion of a culture of delivering on EE targets.
• Develop capability , succession and career pathways
Develop our workforce and structures to support the delivery of the strategic plans and grow our next generation of leaders from within.
• Establish a performance motivated culture
Increase accountability and proactively manage, recognise and reward performance aligned to the delivery of the strategic plan.
• Enhance values -based leadership
Increase the focus and commitment to demonstrating behaviours consistent with the
Woolworths Values.
• Attract outstanding talent
Deliver a compelling employment brand that will attract outstanding talent with a strong cultural fit which demonstrate the Woolworths valuedriven behaviours.

Strategic objectives:
Sustainability is recognised as a vital part of the Woolworths Difference by our people, our
suppliers, our customers and other stakeholders. Our sustainability initiatives are embodied under the Good Business Journey and we have set and communicated our targets. We are on track to substantially achieve our original 2012 objectives and have set updated targets through to 2015. We have made good progress in addressing the sustainability impacts of our own operations and are now focusing on the lifecycle of our products to ensure that we centre our attention on the impacts of food production and the use of textiles products
by customers – the areas that have the biggest energy and water impacts in the value chain.
The Good Business Journey focuses on six key areas that we believe are priorities for a retailer operating in South Africa: sustainable farming, water, energy, waste, social development and transformation.
• Sustainable farming
The focus of our work in the Food supply chain will be on extending our Farming for the Future programme to 50% of the Food business by 2015, thereby reducing pesticide, chemical and fertiliser usage further and building soil quality. We will continue to appropriately manage the impacts of farming and fishing on bio-diversity.
• Water
South Africa is a water scarce country and we will also focus on water reductions and the management of waste water in our Food supply chain.
• Energy
We will continue to focus on energy efficiency in our own operations with a target to reduce relative energy usage by 40% from our benchmark year. We are designing textile
products to assist customers to save energy and water in their use of these products.
• Waste
Woolworths has made a commitment that all packaging will be recyclable from 2015 and 50% of food packaging will contain recycled content. In addition to this, customers will be able to make use of recycling facilities at every Engen/WW site and over 120 locations.
• Social development
Our social development focus is to contribute to South Africa’s education through our EduPlant programme, teaching children about the growing of food and providing them with food so that they can learn. Our efforts through the Making the Difference programme and MySchool further support the education focus. We aim to increase contributions from the MySchool programme to R50 million per year by 2015.
• Transformation
We have achieved our target of becoming a Level 4 BBBEE contributor by 2012 – a year
ahead of target – and will work hard to maintain our status given the changes to some
categories of the DTI scorecard. We aim to increase communication to customers, staff and other stakeholders around sustainability to create a deeper understanding of these
important issues.


Woolworths is committed to growth through responsible retail. It devotes a significant amount of its energy and resources to ensure sustainable development within the context of the changing social and environmental needs of South Africa. It produces a yearly Sustainability report separate to its Annual report and launched the Good business journey in 2007 – a five-year plan outlining the targets and commitments of the business specifically related to sustainable growth. 


I took over from Simon Susman as Group chief executive officer in November 2010 after an
extensive transition period of ten months. Having been involved with the Woolworths business (through its subsidiary Country Road) for over 12 years, most of which I worked directly with Simon, I have a deep understanding of the Woolworths brand and its values.
I have not sought to materially change the direction of the business but rather to refine
and evolve the strategies that were in place and working well. I have however driven a
streamlining of structure, improved accountability and responsibility, faster decision-making,
a performance-based people culture and engendered a real focus on profitability and
the key levers that produce it.

The Group produced a strong result for the year. Our turnover increased by 9.4%, our profit before tax was up 31.1% and adjusted headline earnings per share increased by 36.7%. We declared a dividend of 143.5 cents per share, up 36.7% on the prior year.


Clothing and General merchandise
Clothing and footwear sales in South Africa were up 11.5% on the prior year. A credible result that was around 1% ahead of market growth. Our three key initiatives, namely, Women’s footwear and accessories, Lingerie and Babyworld, performed particularly well and all three saw us gain good market share in those areas. The margin improvement in Clothing and General merchandise was the highlight. A move from onshore production to offshore production and an increase in direct sourcing as opposed to through an agent or third party, allowed us to increase margin from 40.0% to 43.7%. It was this that was the principal driver of a profit before tax increase of 35.7% in Clothing and General merchandise.

Our Food sales grew by 10.7% on the prior year which was around 4% ahead of the market.
A good result. Improved pricing, a focus on value campaigns, increased innovation and newness and our newly launched WRewards loyalty programme all contributed to the success. We were able to also improve margin, both at a gross level and operating level, and the profit before tax in our Food business rose by 39.4%.

A strong operating profit improvement of 82.3% was driven by the quality of the debtors’ book
which allowed impairments to fall from 5.1% to 1.4%. Book growth was modest but improved
through the year enhanced by the WRewards loyalty programme. The growth of the book and
the improved integration of the Woolworths Financial Services business with the core
Woolworths business is a priority for us. Our partnership with ABSA remains strong and we
are aligned on our future objectives.

Australian retail trading conditions were the toughest for many years. Consumer confidence
was low as a result of seven consecutive interest rate increases and a number of natural disasters. Total turnover was up 1.2% but comparable sales down 8.6%. Despite this, the business increased profit before tax by 9.5% through excellent cost control, good inventory control, lower markdowns and the benefit of a strong Australian Dollar. A new Chief executive officer, Howard Goldberg, was appointed in March 2011. He comes with extensive Australian retail experience and has already begun to make a very positive mark on
the business.

As I said at the start of this report we have refined and evolved pre-existing strategies during
the course of the year and I will not repeat what is set out later in this Integrated Report on our strategic objectives, but I would like to note what were some key highlights for this year:
• We sought to reward our loyal customers by launching a loyalty programme offering material discounts at point of purchase to holders of a WRewards card. We aimed to increase the number of visits, number of items purchased and total spend of our loyal customers.
• We also wanted to increase the information we have on our customers to better incentivise,
improve and better target our marketing and to increase the cross-shop. The programme was very successful, over delivering our targets in a very short space of time and has been very well received by our customers.
• We have focused on profit to good effect. Both the Food division and the Clothing and General merchandise division are intent on achieving the return on sales of 17% [Clothing and General merchandise] and 6% [Food] that we have signalled to the market as our aim for 2014. By focusing on the key levers, including the cost of doing business, we saw return on sales increase from 12.3% to 15.3% in Clothing and General merchandise and from 3.8% to 4.8% in Food.
• We made the decision to exit franchise during the course of the year. It was a tough decision and was met with a good deal of criticism and concern from our franchisees. The purchase price offered was fair and most have now been sold. We have either purchased or are in the process of purchasing around 75% of the local franchise turnover. Conversion has
been well executed and having spent around R600 million we are confident we will achieve
an IRR of around 18%. A good return on investment, but more importantly, we now have a more simplified business and are in control of our brand.
• The Good Business Journey is the term we use for all our efforts in sustainability, transformation, social responsibility and the environment. We set ourselves tough targets in 2007 that we hoped to achieve by 2012. We are 80% of the way there and will shortly announce new targets for the next four years.
In sustainability we were named as the International Responsible Retailer in September
2010 at the World Retail Congress. We have also recently been included in the Dow Jones World Sustainability Index, the only South African retailer to be included and one of only five South African companies in all. Our achievements in this area have improved brand equity and have materially saved costs (an estimated over R80 million over a four-year period).
In transformation we achieved a Level 4 BBBEE status (from Level 5) one year ahead of our plan. On social responsibility, customers, the business and our people have made major commitments both to fundraising and involvement and together we raised or donated some R32 million plus donated food to the value of R338 million to a range of charity organisations.

The economic climate in South Africa is likely to be tougher this year than last and certainly less predictable and more subject to the risks of a further global slowdown. We will stick to our strategies that have been delivering for us but will prepare the business for tougher times. We will take cost out of the business in a systematic and sustainable way, manage our inventories tightly and ensure our prices are competitive at all times.

I would like to thank all Woolworths customers for their continued support and all the staff at
Woolworths for their commitment, passion and energy and for their contribution to an excellent result for the year. Buddy Hawton is stepping down from the Board of the company in November 2011, having served nine years as Chairman. On behalf of the Board
and management I wish to thank Buddy for the significant contribution that he has made to the Group.
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This is the first fully Integrated Report from Woolworths Holdings Limited. Last year we
began the process of reporting in an integrated fashion. This year we have taken integrated
reporting further and plan in future years to continue to make strides in improving how we
report the integrated and sustainable nature of our business.

South Africa’s economy weathered the global financial crisis in 2008 and the resultant
economic recession in 2009 better than most. Further, as evidenced by the retail sales market growth figures, South African consumers in general and LSM 8 – 10 consumers in particular regained confidence in the past year.

Our strategy has been clear and consistent over the past three years and continues to
deliver benefits. Good merchandise together with a better understanding of and clarity
about our customers, has driven good sales growth ahead of the market across the board.
Higher margins through the sourcing strategy together with good cost control, helped to
deliver strong profits for the year. Adjusted headline earnings per share grew by 36.7% off the back of good sales and margin growth. Return on equity grew to 44.1%, well above the weighted average cost of capital of 13.2%. We have increased dividends by 36.7%, maintaining a dividend cover of 1.5, thus effectively returning two-thirds of profits to
shareholders. The balance sheet remains very strong enabling the company to buy back R614 million in shares, R339 million completed in the financial year with an additional R275 million bought after year-end.

The company’s performance in non-financial areas, too, will help to ensure that Woolworths
continues to build a truly sustainable business. We have set tough targets on a range of sustainability issues and these form the basis of our Good Business Journey. The initial targets set in 2007 were planned to be reached by next year. We have achieved 86% against our 2011 targets and are already at 80% of our 2012 targets. We therefore remain on track for 2012 and have seen some excellent results in our energy saving and transformation targets and the Farming for the Future programme. The Good Business Journey programme
has received international recognition with Woolworths being recognised as the International
Responsible Retailer of the year for 2010. This is the second time that we have won this prestigious award in the past three years. In a report issued by the World Economic Forum
and the Boston Consulting Group, Woolworths was named as one of the sustainability
champions of the developing world. Of the 16companies that met the criteria, Woolworths was one of only three in Africa and is also the only retailer to make the list. Woolworths has, for the first time, been includedin the Dow Jones World Sustainability Index (DJSI), the world’s most respected sustainability index. Woolworths is the only South African retailer and
one of only five South African companies to be listed on the DJSI. We were included once again in the JSE SRI Index and were named one of the best performers in the index. The business has now refreshed the sustainability strategy and set new, tougher targets for 2015. Transformation and black economic empowerment are a key part of our sustainability strategy. We are particularly pleased to have exceeded our empowerment targets for the year by achieving a Level 4 BBBEE contributor status; a year earlier than we had planned. We are now half-way through our black economic empowerment employee share ownership scheme that was set up in June 2007. It has benefited those employees who are
beneficiaries, some seven thousand members of staff, with payouts of over R45.5 million in dividends to date. Members will also benefit from a capital payout at the expiry of the scheme in 2015.

At the beginning of the year a decision was taken to exit the franchise operation in South Africa and operate these stores as corporate stores. We have acquired 23 franchise stores at a cost of R250 million, with a further 31 stores acquired subsequent to year-end for R384 million. This represents 75% of the local franchise turnover. We redefined the retail model employed in the rest of Africa from being one of a franchisee relationship to a partnering relationship. It is our intent to take a controlling interest in joint venture operations in the
countries in which we trade and we will engage with the current franchisees to achieve this. We will also expand into new countries where there is a good experienced partner.

We believe that good governance is achieved by applying the principles of integrity, fairness,
transparency and accountability in all our business activities. With the finalisation of the
King Report on Corporate Governance (King III), we welcomed the opportunity to benchmark our own governance principles. In particular, we applaud the introduction of the concept of “apply or explain”. It is important that there is a balance between application of the recommendations of King III and the practical implementation that empowers and enables the company. Last year we commenced with early adoption of some of the recommendations and have now completed our review. Where we have agreed not to apply the recommendations as articulated by King III, we have explained to our stakeholders
how we have applied them in a different manner. The remuneration strategy and policies applied by the company will be voted on a non-binding basis by shareholders for the first time this year. Our remuneration strategy and policies are set out in the Remuneration report included in this 2011 Integrated Report.

In the past few years succession planning has been an important issue and during the year
we began implementing that plan. In November 2010, Ian Moir replaced Simon Susman as Group chief executive officer. Having successfully managed the Group chief executive officer succession process, we simultaneously began planning for change at Chairman level. By
creating the position of Deputy chairman, which Simon filled, we were able to better prepare
Simon to take the Chairmanship when I step down in November this year, having, by then,
served nine years as Chairman. At our Board meeting in August, it was agreed that Simon would assume the Chairmanship on my retirement at the end of the annual general meeting
to be held on 17 November 2011. As Simon held the role of Group chief executive officer within the prior three-year period and holds a significant number of shares, he will be classified as a non-independent Chairman. Consequently, we have appointed Tom Boardman as the lead independent director. The role of Deputy Chairman will fall away upon Simon assuming the Chairmanship. The appointment of Stuart Rose in early January
brings valuable international retailing experience to the Board. We will propose the appointment of Zarina Bassa as a director at the annual general meeting. Zarina will also be proposed as a member of the audit committee.

The global economic outlook is uncertain. The economic challenges facing the United States
and the Eurozone are likely to have a negative impact on the rate of growth of the South African economy and, in particular, consumer confidence. We expect trading conditions will be tougher in the next financial year and will prepare the business accordingly. The strategic focus areas are clear and Ian and his team are putting their full efforts behind them. These will continually drive our mix of great value, excellent quality and constant innovation. In what should be a difficult year for customers, the strategic focus areas should assist management to deliver further growth in profitability.

I extend my appreciation to Ian, his executives, management teams and staff for their significant contribution and achievement during the year. I wish to thank my Board colleagues with whom I have worked so closely during my tenure as Chairman of this remarkable company. We have built a strong, diverse Board with an effective committee structure to support the Board’s role. I am proud of the business that Woolworths has
become and am excited about its future. Finally, I wish Simon and the Board, Ian and his executives, together with all management and staff, great success in the future.
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