Views Article – Sharenet Wealth

Australasia, News

S.Africa’s Woolworths expands casual wear offering after return to profit growth

* Retailers see changing demand amid coronavirus crisis

* Sales recover as COVID-19 restrictions lifted

* Revenues in South Africa fashion unit fell in period

* Overall revenues helped by food, Australia and New Zealand (Adds quotes from fashion MD)

By Nqobile Dludla

JOHANNESBURG, Feb 25 (Reuters) – South African retailer Woolworths said on Thursday it was expanding its casual and sports leisure wear ranges to reduce reliance on formal wear, after reporting a rise in half-year profit for the first time since 2015.

The company aims to tap stronger demand for casual and sportswear as the coronavirus pandemic has accelerated a shift to working from home.

Clothes’ retailers have recently struggled to keep up with the change in consumer preference as they battle a drop in footfalls in malls and shopping centres.

“There’s clearly a need for us to be more relevant in both style and trend but we’re not aspiring to be a high fashion or fast fashion business,” Manie Maritz, managing director of the group’s fashion, beauty and home business in South Africa, said.

Woolworths, which also operates in Australia and New Zealand, announced in September a strategic review of its fashion business in its home business, which the firm says has been plagued by poor execution of fashion ranges and a lack of understanding of its customers.

“This approach resulted in customers that were confused or felt that our proposition did not resonate and consequently left the brand,” Maritz added.

To fix this, Woolworths launched a more extensive sports leisure wear range in 18 stores this month and is adding more casual wear ranges in womenswear and menswear.

The group is also ending its Studio.W and WCollection clothing ranges, Maritz said, adding that Woolworths will also add selective third-party brands to its stable of private label brands.

“From a financial point of view, what you’re going to see is an improvement in gross margin, growth in full-price sales, a reduction in markdowns and also reduction in space and hopefully driving up improved turnovers and trading densities,” he said.

Woolworths’ fashion, beauty and homeware business in South Africa, where the group makes 62% of its revenues, saw sales drop 11.2% in the 26 weeks to Dec. 27, hit by a significant decrease in Black Friday spending and the reduction in formal wear trade.

Food sales rose 10.9% in South Africa, where Woolworths has now seen market share growth in that segment for 10 consecutive years, Group Chief Executive Roy Bagattini said.

Overall group turnover and concession sales rose by 5.3% in the first half, recovering from a 4% decline in the second half of its financial year to June 28, thanks also to smaller sales declines in David Jones and Country Road Group in Australia and New Zealand.

The retailer, which last month had flagged the jump in profit, said first-half headline earnings per share (HEPS), the main gauge of profit in South Africa, surged by 58.3% to 261.1 cents. Adjusted diluted HEPS, which strips out certain items, rose by 19.4%.

($1 = 14.4760 rand) (Reporting by Nqobile Dludla; Editing by Rashmi Aich, Edmund Blair and Susan Fenton)

© 2019 Thomson Reuters. All rights reserved. Reuters content is the intellectual property of Thomson Reuters or its third party content providers. Any copying, republication or redistribution of Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters. Thomson Reuters shall not be liable for any errors or delays in content, or for any actions taken in reliance thereon. "Reuters" and the Reuters Logo are trademarks of Thomson Reuters and its affiliated companies.