News: WOW South Africa's Woolworths flags sharp drop in profit as shoppers spend less

JOHANNESBURG, July 31 (Reuters) - South African upmarket fashion and food retailer Woolworths WHLJ.J said it expects to report a decline of up to 32% in full-year total headline earnings on weak sales, as higher living costs continue to weigh on discretionary spend.

Woolworths said on Wednesday headline earnings per share (HEPS) for total operations are expected to fall by 27% to 32% in the 53 weeks ended June 30, from 514.7 cents in the prior year.

Excluding Australian department store David Jones' contribution in the prior year before being sold and on a comparable prior 52-week period, HEPS are seen falling by 14% to 19%.

The retailer will also book a non-cash impairment of goodwill on its Australian men's fashion brand Politix after reassessing the carrying value of that brand. This will only impact the EPS line and not HEPS.

Group turnover and concession sales for the total group decreased by 16.4%, with its South African Fashion, Beauty and Home business delivering turnover growth of 1.4%, while the food business grew sales by 11.2%, further buoyed by the inclusion of the Absolute Pets acquisitions in the fourth quarter.

On a comparable basis and from continuing operations, group turnover grew by 6.2% and by 5.6% on a constant currency basis.

Woolworths said its fashion business was impacted by the weak macro environment, poor product availability due to congestion at the ports "and increased competition from the disruptive entry of international online retailers."

The cold weather also arrived late in winter, delaying shopping for winter clothes.

Fast-fashion online retailers Shein and Temu have aggressively expanded worldwide, including in South Africa, as online shopping has surged after the COVID pandemic. Shein has lured local shoppers with its $5 tops and $10 dresses.

In Australia and New Zealand, retail trading conditions have deteriorated further in the second half, with consumer sentiment at near-record lows and the prolonged cost of living crisis continuing to impact both footfall and discretionary spend, Woolworths said.

As a result, sales at its fashion Country Road business fell by 6.8%.