Woolies ‘firing on all cylinders’

Woolworths reported a massive jump in profits followed by a spike in its share price.

Woolworths logo. Picture: Woolworths Holdings Ltd.

JOHANNESBURG - Woolworths reported a 27.3 percent rise in full-year profit on Thursday, reflecting the resilience of its upscale customer base as the rest of the consumer market struggles with high personal debt.

The company saw an 8.6 percent jump in share price by the end of the day.

Speaking to Mike Wills on 567 CapeTalk/Talk Radio 702's The Money Show on Thursday night, Woolworths CEO Ian Moir said he was surprised by the positive market response.

He says the company is "firing on all cylinders" which lead to the strong results.

At the same time, the financial services side of the company, a joint venture with Absa, has been very successful for them, he said.

Woolworths, which sells luxury food products and clothing, said headline earnings per share (EPS) totalled 340.4 cents in the year to end-June compared with 267.3 a year earlier.

That was broadly in line with a 339 cents estimate by Thomson Reuters StarMine, which puts more weight on more recent forecasts and those from top-rated analysts.

Headline EPS, South Africa's primary profit gauge, strips out certain one-off items.

Retailers in Africa's biggest economy are struggling to grow sales at a faster pace as consumers rein in spending due to high personal debt, unemployment and rising fuel and transport prices.

But Woolworths is faring better as high income consumers continue to splash out on its upscale groceries and apparel.

Moir said their upscale market base is to thank for the company's ability to avoid the general market volatility, but they were not going to "take it for granted".

"They are less exposed to the slowdown in unsecured lending, we've certainly seen no change in how they've responded to our offer."

But he believes the company has also got itself to thank for its success.

Sales rose 23.2 percent to R35.2 billion, with food sales recording 15.4 percent growth.

Sales were also boosted by Woolworths' purchase last year of Australian fashion retailer Witchery Group.