Woolworths Holdings Ltd., a South African food and clothing retailer, said demand from higher-income shoppers will boost sales in the new fiscal year, even as growth in the local economy remains constrained.
The company, which sells international brands such as Country Road clothing and organic, free-range and speciality foods, posted a 27 percent increase in net income to 2.6 billion rand ($252 million) in the 53 weeks through June. That beat the 2.5-billion rand estimate of 11 analysts surveyed by Bloomberg. Sales rose 23 percent to 35.4 billion rand, compared with 12 percent growth in the previous fiscal year, the Cape Town-based retailer said in a statement today.
The first eight weeks of fiscal 2014 sales are “in line with expectations,” Chief Executive Officer Ian Moir said in a presentation in Johannesburg today. The shares rose 8.6 percent to 65 rand by the close in Johannesburg, the biggest gain in almost six years.
Woolworths’s performance bucked a trend of slowing sales growth among South African retailers. Shoprite Holdings Ltd., South Africa’s largest retailer, and Massmart Holdings Ltd. said last week that sales growth slowed as consumers struggle to repay debt amid rising unemployment, with lower income earners particularly under pressure.
“We are getting more people to shop with a trolley and not a basket,” Moir said. “Becoming a big foods business is very much at the top of our minds.”
The retailer is opening larger-format stores and expanding its offerings “to offer a more complete shop,” he said. In clothing, Woolworths is introducing the Witchery and Mimco brands in South Africa in March in 15 new stores.
Woolworths, like its local competitors, is also expanding in Africa. While the focus is on clothing sales in countries such as Botswana, Namibia and Mozambique, the retailer is also looking to open its first store in Angola.
Total retail sales in Africa, excluding South Africa, are expected to be 1 billion rand next year as the number of stores is increased to 65 from 56, Moir said. Woolworths plans to have 82 stores in Africa outside of its home market by 2016.