Financial Performance Report Publication date: March 2019 Next publication: September 2019 Financial Performance Report

Trading Context of the Financial Results HY2019 The six months to December 2018 saw retailers facing continued tough market conditions and increasing competition. The South African economy remained constrained, despite stepping out of a technical recession, GDP growth for Q3 was +2.2%. Consumer confidence is wearing down after the unprecedented jump last year (CCI: 7), with disposable income under pressure and employment opportunities dwindling. Growth in total retail trade sales for the six months at +1.2%, thanks in part to the recovery in some durables and the resilience in health and beauty. Food retail sales growth declined -1.9% for the six months (2018: -1.7%). Rand volatility saw the currency fluctuate in response to domestic and international changes. Inflation consistently within the target range however the Reserve Bank decided to act pre-emptively and increase the interest rate as the exchange rate and international fuel price expectations suggested inflation could increase despite food inflation remaining low at 3.4% on average for the six months (Jan – Dec 17 ave: 5.6%) Against this backdrop, Woolworths Holdings (WHL) announced muted results for the half year to 23 December, with turnover growth (including concession sales 1 ) increasing +1.9%, thanks to a marked improvement in the second quarter, although it remained below the growth of +2.5% in HY2018. Food was once again the star performer, while Fashion, Beauty and Home (FBH) continued working off their range mishap in fashion and started to see some positive results in the last quarter, boosted by growth in beauty. Economic Indicators for Woolworths HY2019 period (July to December 2018) GDP Growth 2.2% CPI 5.0% Fuel Price -5% decline since July 18 CPI Food and Non-Alc Bev 3.4% R/$ Exchange Rate 7% weaker since July 2018 RMB/BER Consumer Confidence Index (CCI) 7 Interest Rate Increased from 10% to 10.25% Growth in Retail Trade Sales 1.2% % of Household Debt as % of disposable income 71% For Q3/2018 Growth in Food and Beverage Retail Sales -1.9% SOURCE: Ti Economic Indicators Report, StatsSA NOTE: 1 Concession sales are the sales of goods by concession operators within the store

Woolworths Group Performance Metric FY2017 FY2018 HY2019 Turnover Performance Turnover (incl. Concessions) Turnover (excl. Concessions) Woolworths Retail Turnover +2.7% to R74.1bn +3.4% to R67.2bn +5.5% to R41.3bn +1.6% to R75.2bn +2.1% to R68.6bn +5.1% to R43.4bn +1.9% to R39.4bn +2.4% to R36.0bn +3.6% to R22.7bn Profitability Performance Gross profit Gross profit margin Operating profit Operating profit margin +1.1% to R26.67bn 39.7% -10.9% to R6.2bn 9.2% +0.8% to R26.89bn 39.2% -15.3% to R5.3bn 7.7% -1.1% to R14.2bn 39.5% (HY18: 40.9%) -5.0% to R3.0bn 8.3% (HY18: 8.9%) Operational Performance Inventory level CAPEX HEPS Internal Inflation (Food) -1.8% to R7bn -9.8% to R2.59bn -7.6% to 420.9 cents +8.4% +7.9% to R7.5bn +1.4% to R2.63bn +2.1% to 618.8 cents +3.2% +14.1% to R9.3bn -13.6% to R1.1bn -2.9% to 200.4 cents +1.2% “Our customers proved more resilient than I expected, and that is because we have done a really good job of keeping our prices competitive.”– Ian Moir, Chief Executive Officer SOURCE: Woolworths Holdings Ltd

Woolworths Group Performance cont. Group Turnover Performance Turnover growth incl. concession sales Adjusted for earlier close Comparable Growth Turnover Growth Excluding Concessions Group 1.9% -- 2.4% Woolworths Retail 3.6% Food 6.3% 7.0% 4.2% FBH -2.0% -1.6% -2.4% David Jones 2 1.0% 1.5% 0.9% 0.1% 3 Country Road Group 2 2.3% 3.0% 0.5% 0.7% 3 Group sales increased +1.9% to R39.4bn (including concession sales1), slightly ahead of the +1.6% growth reported for FY2018. Constant currency growth +2.7% for HY2018 (FY2018: +2.9%). Impacted by one less day of pre-Christmas trade, due to the closure on the 23rd Dec 2018 as well as tough trading conditions in both markets and continued structural changes overseas Excluding concession sales, turnover growth +2.4% to R36bn for HY2019 Woolworths Retail (Food + FBH) contributes 63% to the Group’s sales excluding concession, with sales growth +3.6% to R22.7bn SOURCE: Woolworths Holdings Ltd NOTE: 1 Concession sales are the sales of goods by concession operators within the store 2 David Jones and Country Road Group figures in Australian Dollar Terms including concession 3 Excluding concession David Jones and Country Road Group figures in Rands

Woolworths Retail Performance Fashion, Beauty and Home (FBH) Sales declined -2.0% for HY2019 to R7.1bn, -1.6% adjusted for earlier close Range Improvements , better depth of stock and execution Less winter clearance sales in the first three months and positive growth in the last three month, turnaround in womenswear, roll out of high-end brands in beauty Comparable sales growth -2.4% and +0.6% net new space Internal inflation 1.7% (FY2018: +0.8% | FY2017: 7.3%). Fashion: +0.8% Online sales growth +34.4% due to increased availability, online promotions and app capabilities Woolworths Food Continues to consistently deliver strong and ahead-of-market sales growth at +6.3% to R15.4bn for HY2019, +7.0% growth adjusting for the earlier close High levels of investment in price and promotion Comparable store growth +4.2% and +1.4% net new space Internal food inflation of +1.2% indicates strong volume growth reflecting the resilience of its more affluent customer base with competition heating up from Pick n Pay and Checkers to gain these customers Online growth at +17.8% SOURCE: Woolworths Holdings Ltd

Australian Market Although the interest rate is low and job growth is strong consumers are under pressure due to high levels of debt, low wage growth and a slowing housing market The apparel sector is considered highly competitive and promotionally driven and shopping centres are seeing footfall and trade decline David Jones Performance David Jones sales +1.0% in A$ growth with the market quiet after ‘Black Friday’ at the end of November Growth +1.5% adjusted for earlier close Comparable growth +0.9% (+1.3% adjusted for earlier close) with new store sales offsetting the disruption of the Elizabeth street refurb Focus on private label and food range Net space increased +2.7%, with plans in place to reduce net space and improve the store portfolio’s productivity Strong online sales growth at +46.1% , online now contributes 7.7% to sales with a 2020 target of over 20% Ian Moir will be working with the management team until a new CEO is appointed following the resignation of David Thomas, for personal reasons, in Jan 2019 Country Road Group Performance Country Road Group sales +2.3% for HY2019 in A$ Growth +3.0% adjusting for the earlier close Comparable growth +0.5% Improved Country Road performance and continued strong performance from Witchery, Politix and Mimco Net decline in retail space -1.7%, +4.0% with Politix roll out in David Jones Online sales growth +20.0%, with online contributing 17.7% of sales and plans to deliver a ‘market- leading digital experience’ SOURCE: Woolworths Holdings Ltd

Woolworths Financial Services Performance WFS reported another strong performance in HY2019 with debtors book average growth +4.0% Net interest income declined -5.5% caused by the interest rate drop in Mar 2018 and financial adjustments 1 Impairment charge declined -25.6% to R195m, attributed to the improved book shape, strong collections and lower debt counselling inflows Annualised impairment rate for six months reduced 1.5% to 3.5% Woolworths’ card and credit card accounted for 15.7% of sales (R3.9bn) (HY2018: 15.4%) Credit cards account for 2.5% (HY2018: 1.9%) Woolworths store credit cards account for 13.3% of sales (HY2018: 13.5%), remained at 21.7% of Fashion and 9.4% of Food sales Operating costs +4.3% including investment to get new customers and campaigns to get more instore spend from existing customers Profit before tax +5.0% to R437m with return on equity at 35.5%. FY2021 return on equity target 27.5% to account for IFRS 9 and opening reserves SOURCE: Woolworths Holdings Ltd NOTE: 1 Changes were made to the accounting standards – IFRS 9 and IAS 39 came into effect

Group Profit Performance Gross Profit Woolworths gross profit declined -1.1% in HY2019 to R14.2bn Gross profit margin declining to 39.5% in HY2018 (HY2018: 40.9%) SOURCE: Woolworths Holdings Ltd

Group Profit Performance cont. Gross Profit cont. Woolworths Gross Profit (R’m) and Gross Margin HY2019 Gross Profit (R’m) Growth (HY2019 vs HY2018) % FY2018 Gross Margin HY2019 Gross Margin Comment WHL Group Total R 14 227 -1.1% 7.7% 8.3% WW Retail R 7 243 2.0% 32.2% 31.9% Food R 3 783 4.6% 25.0% 24.6% Investment in price and promotional activity Offset in part by higher rebates FBH R 3 337 -0.9% 46.7% 47.1% Increased promotional activity offset by the higher proportion of sales from full-priced sales smaller winter clearance and tighter inventory management Country Road Group R 3 642 1.2% 62.8% 63.9% Improved margin from higher full-priced sales Improved sourcing and good inventory management David Jones R 3 342 -9.3% 42.9% 44.0% Increased promotional activity in a competitive market Once-off inventory and cost of sale adjustments due to system changes SOURCE: Woolworths Holdings Ltd

Group Profit Performance contd. Operating Profit Operating profit declined -5.0% in HY2019 to R3.0bn Operating profit margin declining to 8.3% in HY2019 (HY2018: 8.9%) SOURCE: Woolworths Holdings Ltd

Group Profit Performance contd. Operating Profit cont. Woolworths Operating Profit (R’m) and Operating Profit Margin HY2019 Operating Profit (R’m) Growth (HY19 vs HY18) % FY2018 Operating Margin HY2019 Operating Margin FY2021 Operating Margin Target Comments WHL Group Total R 2 976 -5.0% 7.7% 8.3% WW Retail R 2 143 -5.6% 6.1% 6.0% Food R 1 071 0.6% 7.4% 7.0% 7% Expense growth +6.1% with strong cost focus Store costs growth +7.9% with higher security costs – incl. KZN bomb threats Higher volumes and increased space put pressure on costs but operating margin was on target at 7.0%. Adj for earlier close operating profit +2.0% FBH R 915 -11.8% 12.5% 12.9% 14 - 16% Expense growth +4.0% Store costs growth +4.3% -new space, beauty roll out Despite the gross margin improvement and good cost control, the lower sales led to lower operating profit (-9.9% adj for earlier close) Country Road Group R 636 5.6% 9.7% 11.2%  12% Expenses growth +2.8% in A$ Store growth +3.9% (comp +0.3%) A$ Operating profit +3.4% in A$ (+7.9% adj for earlier close) David Jones R 468 -29.4% 4.5% 6.2% 6 - 8% Expenses growth -0.5% in A$ Store growth +1.3% (comp +0.1%) A$ Cost saving initiatives and structure changes saw other operating costs well controlled. Operating profit -28.8% in A$, with adjustments for strategic initiatives growth -10.7%, adj for earlier close -8.5% in A$

CAPEX Group CAPEX declined -13.6% to R1.1bn in HY2019 (HY2018: R1.3bn) CAPEX for HY2019 per division as follows: Woolworths CAPEX declined -16% to R520m (HY2018:619m) David Jones CAPEX declined -8.9% to A$51m (HY2018: A$56m) Country Road Group CAPEX declined -18.2% to A$9m (HY2018: A$11m) Maintenance CAPEX R1,190m 1 , including value chain and finance system upgrades Expansion CAPEX R202m 1, includes new stores, and investments in supply chain capacity Future Planned CAPEX: Planned CAPEX for FY2019 is R3.16bn Estimated R2.4bn on base CAPEX and the balance on strategic initiatives From FY2020 CAPEX is expected to normalise to around R2.7bn per year SOURCE: Woolworths Holdings Ltd NOTE: 1 totals may vary due to roll over of funds from previous period

% Contribution to Group Inventories Inventory Levels Inventory Level (R’m) and Inventory Level % Change Inventory (R’000) Growth % FY2018 vs FY2017 % Contribution to Group Inventories Group R 9 298 14.1% WW Retail R 4 403 15.8% 47% Country Road Group R 1 237 15.5% 13% David Jones R 3 658 5.0% 39% Inventory levels increased +14.1% to R9.3bn in HY2019 (HY2018: R8.1bn) Growth in inventory levels is attributed to: Earlier close, sales for the 24th December not yet taken off the stock line Impact of space growth and new stores Higher stock levels in FBH SOURCE: Woolworths Holdings Ltd NOTE: Inventory in FY2015 increased +71.2% due to the inclusion of David Jones

Internal Inflation and CPI Internal food inflation for Woolworths for HY2019 is reported at 1.2% (HY2018: 4.4%) This is below the average food CPI of 3.4% for the six month period Internal inflation for FBH at 1.7% for HY2019 with+0.8% for fashion (FY2018: +0.8% | FY2017: 7.3%). CPI for the same period is averaged at 5.0% Expected internal inflation for FY2019 Food: 4.0% FBH: 5.5% with 4.5% for fashion SOURCE: Woolworths Holdings Ltd, Ti Economic Indicators Report, StatsSa

In Summary Woolworths Holdings announced muted results for HY2019 The positives: Turnover (including concession sales) +1.9% from R38.6bn to R39.4bn Turnover (excluding concession sales) +2.4% from R35.1bn to R36.0bn Food Turnover growth remains market-leading at +6.3% from R14.8bn to R15.8bn, with comparable store sales +4.2% and good volume growth Food operating margin on target (7%) despite investment in price The negatives: One day less sales due to early close (23rd December 2018) Structural changes and refurbishments overseas adding to pressure on sales and profit FBH sales -2.0% as ranging challenges cycle out of the business (Q2 performance better than Q1) Operating profit -5.0% from R3.1bn to R3.0bn with operating profit margin declining from 8.9% to 8.3% ‘Black Friday’ and promotional activity at the end of November pulled sales out of December HEPS declined -2.9% to 200.4 cents

Outlook Trading will remain challenging for South African retailers, this is the new normal, with South Africa’s GDP forecasts muted. In a climate of geo-political uncertainty globally, over and above domestic challenges, with fiscal constraints and low investment growth, there remains little hope for growth in consumer spending in the short to medium term. Consumers face ongoing pressure on their disposable income, despite the lower inflation, as interest rates rise, credit extensions are hard to come by and unemployment levels remain high. Trading conditions in South Africa and Australia will remain tough, especially in the short term, due to a straitened economy and guarded consumer sentiment respectively. With the structural changes made within the FBH business in South Africa, and transformational projects almost fully completed at David Jones, the Group remains confident that it can face its trading challenges head on and recover from recent underperformance and ensure longer-term growth and profitability.

Maryla Masojada. |. Lead Analyst Carey Leighton. | Maryla Masojada | Lead Analyst Carey Leighton | Associate Retail Analyst