South Africa’s Woolworths plunges most in two years

Bloomberg

Woolworths Holdings Ltd. plunged the most in almost two years after South Africa’s largest food and clothing retailer said sales growth slowed in the fiscal first half, while earnings also declined.
Revenue increased by 2.5 percent in the 26-week period ending on December 24, compared with 6.7 percent the previous year, the Cape Town-based company said in a statement. Sales at Australian unit David Jones fell, as did revenue in the South African fashion, beauty and home division.
The weak performance at David Jones was “related to changes in styling and the increased introduction of private label Woolworths brands,” Alec Abraham, an analyst at Johannesburg-based Sasfin Securities, said. “In South Africa, the fashion performance is unsatisfactory.”
The stock slumped as much as 9 percent and traded 6.1 percent lower at 59.49 rand as of 9:57 am in Johannesburg. Trading volumes were more than 42 percent of the three-month average less than an hour into the session.
Woolworths’s performance shows that its focus on wealthier South African customers hasn’t made it immune from an environment of weak consumer confidence in the country, partly caused by unemployment of almost 28 percent. Retail sales growth slowed in October, the most recent month for which data is available, and was weaker than economist estimates. South Africa’s new ruling-party leader, Cyril Ramaphosa, said that economic revival was one of his main priorities, and that he sees higher growth in 2018 than the 1.2 percent forecast by the central bank.
Headline earnings per share are expected to have declined between 12.6 percent and 17.5 percent over the relevant period.