Woolworths flags half-year profit dive on David Jones
Half-year profit at South African retailer Woolworths Holdings may dive as deep as 17.5 percent, the company said on Monday. The announcement saw shares decrease by more than 9% by end of day trade.
The Cape Town-based company said in a statement on Monday that earnings per share are expected to be more than 20 per cent lower, in part because of the Australian review.
For the 26-week period ending December 24, revenue increased by 2.5 per cent compared with 6.7 per cent the previous year. Sales at David Jones fell, as did revenue in the South African fashion, beauty and home division.
The African country's largest food and clothing retailer said profit will be hurt mostly by a revaluation of its David Jones business in Australia, which it acquired four years ago, along with the luxury department store's stable mate Country Road.
Headline earnings per share are expected to have declined between 12.6 per cent and 17.5 per cent over the relevant period.
Earnings per share will also be down as a result of the inclusion in the prior period of profit from the disposal of a property in Sydney.
The David Jones business was valued at 24.2 billion rand ($2.5 billion) in June, Woolworths said, which bought the Australian department store chain for some $2.1 billion in 2014.
Shares in Woolworths fell as much as 9.2 percent after the announcement before paring losses. At 0852 GMT it was down 5.5 percent at 59.85 rand ($4.85).
Woolworths said in August, it plans to spend 2.1 billion rand in South Africa in 2018 and $250 million in Australia in its David Jones and Country Road clothing brands.
Woolworths, which sells groceries, food and homewares, is facing tougher competition in Australia from fast-fashion giants such as H&M and Zara, and new entrant Amazon, which opened to the market right before Christmas.
Meanwhile, both the recession and political turmoil have eroded consumer spending back home in South Africa.
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