Woolworths shares dip as sales disappoint

Woolworths shares dip as sales disappoint

FMCG SUPPLIER NEWS

Business Day - Nov 18th 2011, 08:32

Shares in Woolworths fell more than 2% yesterday after the food and fashion retailer reported disappointing sales growth in its clothing unit as well as poor volume growth in its first five months of trading in its full year. 

Group sales for the 20 weeks to November 13 rose 10,3% compared with the previous period, with sales in comparable stores up 7%, it said yesterday.

Locally, the company said clothing sales rose 9,5% with inflation of 6,6%, with comparable store sales up 5,9%.

Woolworths had "disappointing sales growth, which meant they may have had a fashion misfit. What really is the issue is that there was no volume growth in the clothing business," an analyst, who wished to remain anonymous in line with company policy, said.

Clothing and home-ware makes up about 34% of the company’s turnover, according to Woolworths’ 2011 annual report.

Shares in the company fell 2,1% to R39,99, its lowest level in close to two weeks. For the year, shares gained 49%.

Woolworths CEO Ian Moir was not available for comment at the time of publication.

Last week, the company’s rival clothing and home-ware retailer, Foschini , reported 18% growth for its first half. Earlier this week, predominantly cash-based retailer Mr Price reported 11% growth in its first six months. Truworths said retail sales for its first 19 weeks until November 6 rose 9,3%, with product inflation averaging 8%.

Woolworths said its food unit — which contributes about half to turnover — grew revenue by 10,8%, with lower than expected price growth of 3,5%. Sales in comparable stores gained 7,2%.

Affected by a reduction in its cellular business, general merchandise sales rose 3,4%, and 2,5% in comparable stores.

Retail space in SA, excluding the conversion of 50 franchise conversions, grew by 2,5%.

Sales in the company’s Australian business Country Road — which includes the South African clothing segment — contracted 0,8%, with sales in comparable stores falling 4,5%. Trading space in the country grew 4,9%.

The Woolworths Financial Services debtors’ book reflected year-on-year growth of 3,9% at the end of October.