WOOLWORTHS HOLDINGS LIMITED UNAUDITED INTERIM GROUP RESULTS FOR THE 26 WEEKS ENDED 23 DECEMBER 2018 AND CASH DIVIDEND DECLARATION
W O O L W O R T H S H O L D I N G S L I M I T E D 2019 Interim Results 1 WHL 1 / 2019
WOOLWORTHS HOLDINGS LIMITED INTERIM RESULTS 2019 ANALYST PRESENTATION PRESENTATION OUTLINE 01 / Review of the period 02 / Financial review 03 / Strategy update 04 / Outlook 2
REVIEW OF THE PERIOD Ian Moir WHL 3 / 2019
WOOLWORTHS HOLDINGS LIMITED INTERIM RESULTS 2019 ANALYST PRESENTATION GROUP PERFORMANCE • Cyclical challenges and structural changes continued • Impact of Black Friday • Sales growth impacted by one day less of pre-Christmas trade, compared to LY • Woolworth FBH had positive sales growth in Q2 due to better product and brand execution • Continued market-leading sales growth in Woolworths Food • David Jones performed well in Q1 but sales weakened in line with rest of market in final weeks leading up to Christmas • Strong performance from Country Road Group • Tightly controlled capex and well-managed debt position • Turnover up 1.9% ; adjusted profit before tax down 9.2% • Headline earnings per share declined by 2.9% • Interim dividend reduced by 15.2%
SOUTH AFRICAN MACRO ENVIRONMENT Real annual GDP growth % 6% • SA exited from technical recession 5% experienced in 2018 H1 in H2 4% • However, growth momentum remained Forecast 3% 2% weak and well below estimated 1% potential growth rate 0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 • Consumer confidence fell significantly -1% -2% from highs seen post Ramaphosa’s Avg 2007 – 2017 election FNB/BER Consumer confidence index 30 • Consumer spending remains under 25 pressure, hampered by increases in 20 15 interest rate, muted credit extension 10 and high unemployment 5 0 -5 -10 -15 -20 2011Q1 2011Q2 2011Q3 2011Q4 2012Q1 2012Q2 2012Q3 2012Q4 2013Q1 2013Q2 2013Q3 2013Q4 2014Q1 2014Q2 2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2 2017Q3 2017Q4 2018Q1 2018Q2 2018Q3 2018Q4 WHL 5 / 2019
WOOLWORTHS HOLDINGS LIMITED INTERIM RESULTS 2019 ANALYST PRESENTATION • Sales 2.0% lower ( 1.6% lower adjusting for earlier close), with comparable sales 2.4% lower, price movement of 1.7% for FBH ( 0.8% for Fashion), and 0.6% new space • Q1 negatively impacted by poor product execution and smaller clearance sale • Positive sales growth in Q2, with improved product execution in clothing, particularly in womenswear • Previously underperforming brands showed positive turnaround in Q2 • Online sales up 34.4% on LY due to increased availability and online promotions • Strong growth in Beauty • Despite promotional activity, gross profit margin 0.5% higher at 47.1% , due to smaller clearance sale and tight inventory management • Operating profit 11.8% lower ( 9.9% lower adjusting for earlier close), due to negative leverage
• Consistent growth ahead of market • Sales up 6.3% ( 7.0% up adjusting for earlier close) • Price movement of 1.2% , with comparable sales up 4.2% and 1.4% net new space • Volume growth driven by low inflation, higher levels of promotions and price investment • Strong online sales growth, up 17.8% on LY • Gross profit margin declined 0.4% to 24.6% , due to price investment and increased promotional activity • Operating profit up 0.6% ( 2.0% up adjusting for earlier close) • Operating profit margin of 7.0% in line with target WHL 7 / 2019
WOOLWORTHS HOLDINGS LIMITED INTERIM RESULTS 2019 ANALYST PRESENTATION MARKET SHARE % W oolworths Food market share (12mma) market % share growth 10.0 10.0 9.0 9.8 8.0 7.0 9.6 6.0 9.4 5.0 4.0 9.2 3.0 2.0 9.0 1.0 8.8 0.0 Jul 18 Aug 18 Sep 18 Oct 18 Nov 18 Dec 18 Woolworths Food 12mma market share Market 3mma growth of all WSA Food categories Woolworths 3mma growth of all WSA Food categories Source: Nielsen monthly Category Report on WSA food categories
AUSTRALIAN MACRO ENVIRONMENT Real annual GDP growth % • Despite low interest rates and strong job % 5 4.5 growth, consumer spending remained 4 Forecast 3.5 depressed by high levels of indebtedness, 3 2.5 a cooling housing market and low 2 1.5 wage growth 1 0.5 0 • The apparel sector was constrained, highly 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 competitive and promotionally driven Avg 2007 – 2017 Consumer Sentiment W estpac-Melbourne Institute Survey • Continued reduction in shopping mall 135 footfall and softer trade – particularly 125 in last weeks of the festive season 115 • While consumer sentiment remained 105 above baseline for 2018, it has moderated 95 in 2019, indicating a softer consumer 85 environment is likely to persist 75 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 WHL 9 / 2019
WOOLWORTHS HOLDINGS LIMITED INTERIM RESULTS 2019 ANALYST PRESENTATION • Total sales up 1. 0% ( 1.5% up adjusting for earlier close), with sales performance weakening in last 6 weeks of Q2 in line with the market • Comparable sales up 0.9% ( 1.3% up adjusting for earlier close), growth from new stores offset by sales disruption from Elizabeth Street store refurbishment • Net space increase of 2.7% – further net space reductions to improve store portfolio productivity planned • Strong online sales growth of 46.1% , now contributing 7.7% of total sales • Gross profit margin decreased by 2.7% to 38.0% , due to increased promotional activity in the highly competitive market and one-off inventory and timing adjustments related to system implementation • Adjusted operating profit margin decreased from 6.9% to 5.7% • CEO David Thomas resigned for personal reasons in January 2019 • Ian Moir will work directly with the DJ management team while a replacement CEO is found
• Sale s up 2. 3% ( 3. 0% up adjusting for earlier close), comparable sales up 0.5% • Improved Country Road performance and continued strong performance from Witchery, Politix and Mimco • Gross profit margin up 0.3% to 64.0% , due to strong focus on full-priced sales and good inventory management • Continued strong online sales growth, up 20.0% , now 17.7% of sales • Net space increase of 4.0% , largely due to Politix roll-out in David Jones ( -1.7% excluding Group space roll-out) • Operating profit up 3.4% ( 7.9% up adjusting for earlier close) • Operating profit margin up 0.1% to 11.0% • New Country Road Managing Director, Elle Roseby, appointed in July 2018 WHL 11 / 2019
WOOLWORTHS HOLDINGS LIMITED INTERIM RESULTS 2019 ANALYST PRESENTATION FINANCIAL REVIEW Reeza Isaacs
FINANCIAL OVERVIEW Adjusted profit HEPS – before tax HEPS Adjusted diluted -9.2 %* -2.9 % -9.2 % Turnover and to R2.7 billion to 200.4 cps to 202.9 cps concession sales +1.9 % to R39.4 billion EPS Interim dividend ROE at 197 cps 16.6 % .5 -15.2 % to 92.0 cps from 20.1% * -6.6% adjusting for earlier close WHL 13 / 2019
WOOLWORTHS HOLDINGS LIMITED INTERIM RESULTS 2019 ANALYST PRESENTATION GROU P INCOME STATEMENT Dec 2018 Dec 2017 % Solid performance from Food and WFS; Rm Rm change shortfall in FBH Woolworths Fashion, Beauty Tough December; Elizabeth Street and Home 915 1 038 (11.8) impact; lost day due to earlier close; one-off impacts of systems Woolworths Food 1 071 1 065 0.6 implementation LY WFS (50% of PAT) 157 149 5.4 3.4% growth in A$; margin expansion Woolworths 2 143 2 252 (4.8) despite CR clearance David Jones 471 672 (29.9) -6.1% adjusting for earlier close Country Road Group 626 610 2.6 Profit before interest and Lower debt in SA, offset by higher debt tax 3 240 3 534 (8.3) in Australia; translation impacts Net finance and other costs (533) (552) (3.4) Dec Dec Adjusted profit before tax 2 707 2 982 (9.2) 2018 2017 Adjustments Rm Rm Adjustments (103) (7 173) Relocation costs (net of grants Profit/(loss) before tax 2 604 (4 191) >100 received) and store exit costs (127) (80) Tax (711) (669) 6.3 Onerous leases released/(raised) 26 (147) Forex loss (2) (19) Profit/(loss) after tax 1 893 (4 860) >100 Impairment of David Jones – (6 927) assets Adjusted EBITDA 4 260 4 550 (6.4) (103) (7 173) Adjusted effective tax rate 27.3% 28.1% Higher proportion of SA income
INCOME STATEMENT Dec 2018 Dec 2017 % -1.6% adjusting for earlier close; comp Rm Rm change sales -2.4%; smaller winter clearance; -3.3% at 20 weeks; 6 weeks up 0.9% Turnover 7 078 7 223 (2.0) (2.3% adjusting for earlier close); price Cost of sales 3 741 3 856 (3.0) movement 1.7% (Fashion 0.8%) Gross profit 3 337 3 367 (0.9) Up 50 bps; improved intake margin; Other revenue 7 7 – smaller winter clearance; higher full priced sales Expenses 2 429 2 336 4.0 Impact of new space; Beauty roll-out; Store costs 1 709 1 639 4.3 store service levels maintained Other operating costs 720 697 3.3 Adjusted operating profit 915 1 038 (11.8) Adjusted EBITDA 1 126 1 247 (9.7) Gross profit margin – on turnover 47.1% 46.6% Operating profit margin – on turnover 12.9% 14.4% WHL 15 / 2019
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