Woolworths warns of profit slump as Australian lockdown hits sales

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Woolworths has warned that its headline earnings will fall by between 30% and 40% for the 26 weeks to end 26 December, compared to the same period in the previous year.

Sales fell by 2.1%, and company says that trade was "severely impacted" by the extended lockdowns in Australia and by the civil unrest in South Africa.

"Trading momentum across all divisions except Fashion Beauty Home (FBH) improved over the last six weeks of the period supported by more targeted Black Friday promotions, positive festive season trade, and the lifting of lockdown restrictions in Australia," the company said.

In Australia and New Zealand, stores representing 70% of its brick-and-mortar sales base had to close during a lockdown period. This contributed to a 9% fall in sales at its David Jones chain. Country Road Group sales declined by 3.1%.

In South Africa, its Woolworths Food business grew sales by 3.8% for the six months, with prices increasing on average by 2.6%.

"Sales growth should be considered in the context of the high Covid-19 base, which benefitted from increased home consumption," Woolworths said. Online food sales increased by 56%, and is now contributing 3.1% of South African sales.

Its fashion, beauty and homeware business grew sales by 4.2%, with prices up by 5.4%.

"Trading momentum slowed in the last six weeks of the period primarily due to womenswear performing below expectations." Online sales grew by 19.2%, contributing 4.4% of South African sales.

The Woolworths Financial Services net book grew by 5.3% year-on-year to the end of December 2021, compared to a 7.8% contraction at 31 December 2020. Its impairment rate for bad debt improved to 4.0%, compared to 4.1%.

Its share price was down a percent to R54.23 on Thursday morning.

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