Woolworths reported a 7.5% fall in half-year earnings on Wednesday as South African consumers feel the pinch and are cutting back on non-essential items.
The retailer said that the main impact of their decline in earnings could be attributed to an increasingly challenging macro-economic backdrop, given the sustained effect of interest rate increases and higher living costs.
The company noted that their operations were further disrupted by higher levels of load shedding, congestion at the ports, and the impact of Avian flu on the availability of key food product lines.
Woolworths headline earnings per share (HEPS) from continuing operations fell to 203.3 cents in the 26 weeks ended December 24, from 219.9 cents when compared to the previous year.
In terms of total operations, HEPS declined by 31%.
Woolworths said that its profit before tax fell by 14.2% to R2.5 billion.
“The outlook for the rest of the financial year is expected to remain challenging. Whilst inflation is expected to ease gradually, interest rates across both geographies are likely to remain elevated, placing continued pressure on consumer disposable income,” the retailer said.
“In South Africa, the ongoing energy crisis, port and infrastructure challenges are expected to further constrain economic activity. In addition, the upcoming elections and ongoing global geopolitical tensions increase uncertainty”.
Despite these challenges Woolworths said that they are still confident in their ability to deliver profits against their strategies, “and are well placed to benefit from any cyclical consumer recovery”.
“We have a robust balance sheet, are highly cash generative, and are leveraging our strengthened foundation to optimise our existing businesses and invest in new sources of future growth,” the company concluded.
IOL Business