Upmarket retailer Woolworths reported nearly a 25% decline in headline earnings in its interim financial results for the 26 weeks ended 29 December 2024.
The group’s results for the first half of the 2025 financial year reflect the continued strong performance from our leading Food business, offset by lower contributions from our apparel businesses, with both Fashion Beauty Home (FBH) and Country Road Group (CRG) in the throes of significant transformation,” it said.
“The impact of softer-than-expected topline growth in our apparel businesses, coupled with pressure on gross profit margins and increased operating expenditure attributable to our transformation initiatives, negatively impacted profitability,” the retailer said in a statement.
For the first half of the 2025 financial year, Woolworths reported a turnover and concession sales of R40.3 billion, representing a 5.7% increase compared to the same period last year. The Group’s turnover alone stood at R39.6 billion, showing a 5.4% increase year-on-year.
However, adjusted profit before tax (aPBT) fell by 20.6% to R2.0 billion, largely due to softer performances from the apparel divisions and ongoing strategic investments.
Despite this, Woolworths declared an interim dividend of 107.0 cents per share, although this is a 27.7% decrease from the previous year, reflecting the current pressures on earnings.
Woolworths also noted a decrease in net borrowings, which stood at R4.7 billion compared to R5.8 billion at the end of the previous financial year. This improvement is attributed to the sale of the David Jones property in Melbourne, Australia, which provided significant cash inflows.
Woolworths Food
Woolworths Food delivered strong results, with turnover and concession sales increasing by 11.4% and comparable-store sales rising by 7.3%.
The food division benefitted from continued volume growth, improved availability, and ongoing innovation, with significant contributions from Woolies Dash, which saw a 49.2% increase in sales.
Online sales also grew by 37.2%, contributing 6.4% to total food sales.
Gross profit margins increased by 30bps to 24.9%, driven by more efficient promotions and value chain improvements. However, higher operating expenses related to growth investments and inflation led to a 15.2% increase in costs, partially offsetting the strong revenue growth.
Despite this, adjusted operating profit grew by 7.8%, reaching R1.72 billion.
Woolworths Fashion, Beauty, and Home (FBH)
The Fashion, Beauty, and Home business, while delivering a solid 2.5% increase in turnover, faced challenges. Key issues included temporary setbacks in product flow from distribution centre transformations and late supplier deliveries during the peak festive season.
Despite these obstacles, Beauty delivered impressive growth of 17.3%, establishing itself as a leading destination for customers in South Africa.
The business struggled with a significant decline in its gross profit margin, falling by 170bps to 46.3%, primarily due to increased promotional activity and higher costs from the transformation process. Adjusted operating profit decreased by 17.7% to R763 million.
Woolworths Financial Services (WFS)
The Financial Services arm of Woolworths saw a 3.7% year-on-year decline in its book size, but excluding the sale of part of the legal book, it saw a 1.0% increase. The division delivered a 6.6% growth in profit after tax and achieved an impressive return on equity of 22.3%.
Country Road Group (CRG)
The Country Road Group, which was separated from David Jones in 2024, faced a difficult trading environment in Australia and New Zealand. Sales declined by 6.2%, and the company experienced pressure from higher promotional activity and a weaker Australian dollar.
Online sales grew by 27.1% but could not offset the overall decline in sales. CRG’s gross profit margin fell by 320bps to 58.9%, and adjusted operating profit dropped by a steep 71.7%, returning an operating margin of just 2.6%.
Looking ahead, the retailer said it remains cautious about the macroeconomic environment. While consumer confidence is improving in both South Africa and Australia, economic risks persist, particularly in relation to global trade dynamics.
In Australia, while GDP growth is expected to gradually recover, the retail sector is likely to continue facing challenges, particularly with high living costs and promotional pressures.
In the second half of the financial year, Woolworths plans to reassess the value of its underperforming brands within CRG and evaluate its strategic direction moving forward.
“CRG (Country Road Group) is currently in the midst of a significant restructure to reconfigure its operating model and reset its structural economics as a standalone business. This restructuring is being implemented in an accelerated timeframe.”
