33 of 2022`

Newsletter No 33/2 September 2022                                 


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Woolworths triples dividend as clothing sales improve

By Katharine Child

Food sales slowed even as it cut prices, but the group is seeing growth in its clothing business

Retailer Woolworths tripled its dividend as it boasted a healthy cash balance and an improved clothing sales performance, but saw weaker food sales even as it cut prices in the face of cash-strapped consumers and increasing competition from peers.

Woolworths Food, which has long been the star performer for the group, grew sales 4.2% in the year to June 26, with 3.1% growth in same stores, lower than the increase in prices.

However, the group is beginning to see an improvement in its SA clothing business that had been losing market share in previous years.

Renier de Bruyn, senior investment analyst at Sanlam Private Wealth, said: “The Woolworths results exceeded market expectations but, in contrast to previous years, it was the fashion businesses that finally picked up the slack while growth at the SA food business slowed.”

Woolworths revenue was up 1.7% to R80.1bn, and with concessions sales included it equalled R87bn. Its profit before tax rose less than a percent to R5.2bn.

Woolworths said the slow growth in its food business was explained by the high base effect in the previous year when wealthy consumers spent more on eating at home during the pandemic instead of going to restaurants.

CEO Roy Bagattini said: “The performance of our food business slowed. And while some of this can be ascribed to base effects and broader market dynamics, to be frank, we are not satisfied with the results we’ve turned in.”

Woolworths is under increasing pressure from both Checkers and Pick n Pay, which are investing in high-end ranges and smarter stores, and rolled out on-demand online delivery more quickly.

Showing just how much pressure it is under, Woolworths cut its food prices, saying underlying product inflation averaged 3.9% and prices only increased 3.5%.

Its expenses increased as it invested in its on-demand delivery that, along with website sales, now accounts for 3.2% of food sales in SA, as it catches up to competitors. It plans to increase the number of stores with on-demand delivery by another 100 and aims to have the service able to deliver to about 80% of all its SA customers in the next few months. However, this could cut into profit margins due to the unprofitable nature of delivery services.

Full-year profit in the food business declined 3.9% to R2.9bn, but the operating margin is still above 7%, which is considered high for food retailers by global and local standards.

While it is not trying to cut prices too much and compete as a low-cost grocer, Woolworths will invest in marketing its food business as good value for money. It is increasing space by 10% in the next three years by expanding some existing food stores and opening new stores, said Bagattini. This will allow it to add in-demand products such as pet food and additional liquor to stores where it is running out of space.

Having generated free cash flow of R4.5bn and reduced debt, Woolworths will pay a full-year dividend of R2.29, more than triple the 66c dividend paid in 2021.

In SA, the group’s clothing business is showing signs of turning the corner with adjusted operating profit increasing 48.7% to R1.6bn.

Bagattini said the clothing division had stopped attempting to be “everything to everyone” and focused on certain items that it refers to as the must-win categories. These include denim, athleisure, children and baby, lingerie and every day basic clothing. It had reduced its overreliance on female formal wear.

Bagattini said: “I think the ship has absolutely turned. And now we need to double down and begin accelerating where we can.”

Prices in its fashion business increased by an average of 6% over the financial year and it is selling less inventory on promotion, which means consumers are pleased with the products on offer.
Bagattini described the group’s performance as a tale of two halves, with a tough first half marred by riots in SA and severe lockdowns and store closures in Australia and a better performance in the calmer second half.

The group has struggled in Australia since it bought David Jones in 2014 and lost more than R12bn, but it saw better trading in its second half as the pandemic eased.

The David Jones department store is “self-funding” Woolworths, Bagattini emphasised and returned A$50m (R584m) to SA for the second time after sending back A$90m in March. This is a far cry from two years ago when the department chain’s debt threatened the SA business.

De Bruyn said “good cash flow management at David Jones is assisting the group to recoup some of its investment through dividends and puts it into a better position for a potential sale”.

Bagattini would not be drawn on if it would sell the David Jones business, something shareholders have urged for years.

“We are in a good place to be able to have all the options on the table. There’s nothing off the table.”   BL

Too old for luxury? Are high-end brands leaving money on the table by largely ignoring older consumers?

By Sanido Ngubane

Jane Fonda in Gucci’s 2020 Off The Grid campaign.
Image: Harmony Korine / Gucci

Luxury brands are seemingly leaving a fortune on the table when it comes to their approach to older consumers.

A few years ago when I was working as a consumer insights analyst, it struck me as odd that every brand we interacted with and every study that came across my desk seemed to be concerned about one generational cohort only — Millennials. Fast forward six years and Gen Z, which back then you barely heard about is the new buzz.

Everyone wants to know how to sell to them; millennials are fighting with them over being called “uncle” or “auntie” (that’s hilarious, I have to say).

In luxury fashion, Gucci is being lauded for famously “crushing it” with the younger consumers. I mean, I don’t really know if we millennials can be referred to as “younger” when there are Gen Zers telling us we’re old, but let me focus.

It is reported that in 2018, Gucci generated 62% of its $8bn in sales from under-35s. This is a biggie because everyone should know by now that we’re poor and yet, here we are, buying more Gucci than any other generational cohort.

It doesn’t surprise me, though. Luxury brands are often synonymous with ageism. I don’t know what it is but I can make an educated guess that it’s because we’re all obsessed with youth. However, this is something I thought was slowly changing; or maybe I’m just growing older, and with that it’s becoming ever more clear to me that, maybe, there isn’t much to look forward to insofar as seeing representations of what we’re all heading towards agewise.

But as I ponder Gucci is doing better with millennials than they are with, say, the boomers or even Gen-Xers, it strikes me as odd considering those older generations generally have much more disposable income than we do. Are luxury brands leaving money on the table by largely ignoring older consumers?

According to research by London-based marketing and brand consulting groups MullenLowe and Kantar, older consumers are “the invisible powerhouse”. Their study was aimed at helping brands become more “effective at reaching consumers over 55 and explain why ageism means brands are missing a trick”.

The study found that 71% of Britons over 55 were most likely to buy products from brands they felt represented by. It makes sense; if I was 60-something, and everything I would otherwise like is sold to me by fresh-faced 20-year-olds olds, I would think twice about buying.

MullenLowe Group and Kantar found that this ageist approach by brands is causing them to miss the mark with an age group that controls more than £6-trillion in assets. The study found that only 12% of UK ads feature someone from this age group in a leading role, and most of the time they were depicted as “in need of pity and help”. It further notes that these types of portrayals anger this age group, so it makes sense that they wouldn’t be rushing to spend their lifelong earnings on brands that don’t see them for who they truly are — a worthy, cash-flush audience.

Fortunately, the aforementioned Gucci was lauded and used as an example of how to approach the millennials, and now the Gen Zers is not one of those brands. While it’s been noted that some heritage luxury brands are hiring younger and younger models for campaigns as they — the brands, that is — get older, some are moving past ageism. Gucci’s 2020 Off the Grid campaign featured then 82-year-old Jane Fonda. They also had 79-year-old Vanessa Redgrave in a Cruise campaign. Joni Mitchell did Saint Laurent at 71; the late Jane Didion appeared in a campaign for Céline at 80, and centenarian Iris Apfel signed a modelling contract with industry leader IMG Models.

Does this address ageism in luxury fashion? Not by a long shot. I bet that unless you have a very particular interest in fashion magazines and that sort of thing, these are campaigns you may very well have missed. It does, however, give me pause that, as I grow older, I can still aspire to remain stylish without feeling like I’m competing with Gen Z, Generation Alpha and whatever follows.

Join our exciting webinar series, to learn from industry experts on how to grow your business

We are happy to announce that we have 4 webinars planned in September, aimed at equipping designers with skills they need to establish and grow their business.

How to put a collection together for retail:

The first in our series of webinars will take place on the 6th September, from 3pm-4pm. The event will be run by two senior lecturers from the Istituto Marangoni – the Paris School of Fashion, who are both globally recognised in their field.

What will this cover?

The fashion panorama has evolved during the past few years and finding the right positioning and capturing market share means going back to the brand-building basics. This webinar will discuss how through responsible design, range planning, and brand identity you can create a collection that is retail-ready, recognising and understanding how fashion organizations manage product design and development, supply chain and manufacturing processes, as well as distribution and retailing. An insight into the pyramid of the offer will be discussed linking how this can help in the key stages of developing a collection for a specific target market within a defined budget, for different retailers across international markets.

Woolies final results June 2022

Revenue for the year grew to R82.3 billion (2021: R80.9 billion) and gross profit increased to R29.2 billion (2021: R28.9 billion). Operating profit from core trading activities came to R6.8 billion (2021: R6.7 billion). Profit attributable to shareholders of the parent decreased to R3.7 billion (2021: R4.2 billion). In addition, headline earnings per share went up to 398.9 cents per share (2021: 374.4 cents per share).


The board has taken a decision to declare a final gross cash dividend per ordinary share (‘dividend‘), based on a pay-out ratio of 70% of second half headline earnings of the combined Woolworths South Africa business segments (FBH, Food and WFS) as well as Country Road Group.

Notice is hereby given that the board has declared a final dividend of 149.0 cents (119.2 cents net of dividend withholding tax) for the 52 weeks ended 26 June 2022, being a 125.8% increase on the prior year‘s 66.0 cents. This brings the total dividend for the year to 229.5 cents, representing a 247.7% increase on the prior year‘s total dividend of 66.0 cents.

Company outlook

The global macro environment remains volatile, with rising inflation and interest rates posing a headwind to the outlook for economic growth. Whilst this impact on Australian consumer spend should be somewhat mitigated by strong household balance sheets and high employment, South African consumption faces high unemployment and severe energy shortages.

Global supply chain uncertainties and elevated freight costs have been exacerbated by recent global events, placing significant upward pressure on raw material availability and input pricing. Notwithstanding this backdrop, the current momentum of our apparel businesses is expected to continue, and our Food business is expected to deliver a solid underlying performance whilst investing in key initiatives.

We have a robust balance sheet, and significant self-help opportunities across our businesses to grow both revenue and profitability, and are allocating capital accordingly to enhance the overall returns profile of our Group.

Massmart interim results June 2022

Revenue for the interim period increased by 1.6% to R38.2 billion (2021: R37.6 billion) whilst gross profit went down 2.8% to R7.5 billion (2021: R7.7 billion). Operating profit before interest went up 43.2% to R54 million (2021: R37.7 million). Loss for the period attributable to owners of the parent came to R1.1 billion (2021: R1.1 billion). Furthermore, headline loss per share from continuing operations worsened to 417.3 cents per share (2021: headline loss of 166 cents per share).


Our current dividend policy is to declare and pay an interim and final cash dividend representing a 2.0 times dividend cover, unless circumstances dictate otherwise. No interim dividend has been declared in June 2022 (June 2021: Nil).

Company outlook

Total Group sales for the 33-weeks to 14 August 2022 of R52.8 billion represents an increase of 2.9% and a comparable store sales increase of 4.4% over the same period in 2021. Sales from continuing operations of R48.8 billion represents an increase of 4.6% and a comparable store sales increase of 6.0% for the 33-week period to 14 August 2022, over the same period in 2021.

The 7-week sales performance post our interim reporting period showed an improvement relative to the prior year. Total sales from continuing operations increased by 15.5%, and by 12.8% on a comparable store sales basis, driven in part by the civil unrest-comparison period from the prior year. We remain focused on our strategy to strengthen our core business, and are investing in e-commerce, Home Improvement, General Merchandise, and Wholesale Food & Liquor growth.

Pepkor – CEO retirement and appointment of new CEO

In accordance with paragraphs 3.59 and 6.39 of the JSE Ltd. (“JSE”) Listings and Debt Listings Requirements, respectively, the board of directors of the Company (“Board”) advised shareholders and noteholders that Mr Leon Lourens (“Leon”), the Pepkor Chief Executive Officer (“CEO”), has advised the Board of his intention to take early retirement with effect from 31 March 2023. Leon will resign as CEO and from the Board on 30 September 2022 and will be available to Pepkor during his notice period until the end of March 2023 in order to facilitate the transition to the new CEO.

The Board announced that Mr Pieter Erasmus (“Pieter”), who currently serves as a non-executive director of the Company, has been appointed as an executive director and the CEO of Pepkor with effect from 1 October 2022.

Woolies – appointment of independent director

The board announced the appointment of Mr Robert Collins as an independent non-executive director of WHL with effect from 1 October 2022. Rob will also serve on the WHL Group’s Risk and Compliance Committee.

Highest annual earnings for a fashion designer

Ralph Lauren September 2011

With estimated sales of $2.65 billion (then approx. £1.72 billion), Ralph Lauren (US) is the world’s highest paid fashion designer.

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