1. Financial Performance Report
Publication date:
September 2019
Next publication:
March 2020
Financial Performance Report

2. Trading Context of the Financial Results FY2019
The 12 months to June 2019 saw retailers facing continued tough market conditions . The South African economy remained constrained. Growth in total retail trade sales for the period came in at only +1.6% (LY: +4.6%) with retail sales of food and beverages slipping to -1.4% from +0.2% last year. Rand volatility saw the currency fluctuate in response to domestic and international changes. Inflation, although consistently within the target, reached over the mid-point leading the Reserve Bank to bump up the interest rate to 10.25% in Nov Low food inflation, +3.3% (LY: 4.7%), continues to support total inflation which was offset by the rising fuel price. Average CPI 4.6% (LY: 4.5%). Woolworths Holdings (WHL) presented a pleasing set of FY2019 results on the back of trying economic conditions and a challenged retailing environment. The uptick in momentum seen towards the end of H1 continued into H2, resulting in +5.8%1 turnover within Woolworths SA, and Food, in particular, coming out ahead of the market at +7.7% turnover. The strong Food performance we have grown accustomed to was this time supported by the beginnings of the long-awaited turnaround in Fashion, Beauty and Home (FBH). Second half sales were up an encouraging +5.5% for FBH, thanks to a focus on back-to-basics retailing i.e. right range, availability and giving shoppers what they want.
Economic Indicators for Woolworths FY2019 period (July 2018 to June 2019)
GDP Growth
Average +1.0%
CPI
4.6%
Fuel Price
5% higher
CPI Food and Non-alcoholic Beverages
3.3%
R/$ Exchange Rate
9% weaker
RMB/BER Consumer Confidence Index (CCI)
5.25
Interest Rate
Increased from 10% to 10.25%
Growth in Retail Trade Sales
1.6%
Household Debt as % of Disposable Income
72.3%
Growth in Food and Non-alcoholic Beverage Retail Sales
-1.4%
SOURCE: Ti Economic Indicators Report, StatsSA
NOTE: 1 Including concession sales, which are the sales of goods by concession operators within the store was a 53-week financial year for the Group, numbers reported above are adjusted to show 52:52 weeks to facilitate comparison against last year

3. Woolworths Group Performance Indicator Fact Sheet Metric FY2018
Turnover
Turnover (incl. concessions)
Turnover (excl. concessions)
Woolworths Retail1 Turnover (excl. Concessions)
+1.6% to R75.2bn
+2.1% to R68.6bn
+5.1% to R43.4bn
+6.1% to R79.8bn
+5.9% excl. IFRS 15 adj
+6.6% to R73.1bn
+7.9% to R46.9bn
+4.1% to R78.3bn
+3.9% excl. IFRS 15 adj
+4.6% to R71.8bn
+4.7% to R45.5bn
Profitability
Gross profit
Gross profit margin
Operating profit
Operating profit margin
+0.8% to R26.89bn
39.2%
-15.3% to R5.3bn
7.7%
+4.0% to R28.0bn
38.3%
-2.6% to R5.1bn
7.0%
+2.2% to R27.5bn
-6.2% to R4.9bn
6.9%
Operations
Inventory level
CAPEX
HEPS2
Internal Inflation (Food)
+7.9% to R7.5bn
+1.4% to R2.63bn
+2.1% to cents
+3.2%
+10.4% to R8.3bn
+1.0% to R2.85bn
-17.7% to cents
+1.8%
-4.6% to cents
“No doubt the economic challenges and the structural changes that are sweeping through retail continue to challenge us. We cannot blame our result on that alone. We have to admit to the mistakes that we made in clothing [...] We continue to have market leading results in food.” - Ian Moir, Chief Executive Officer
SOURCE: Woolworths Holdings Ltd
NOTE: 1 Woolworths Retail is also known as Woolworths South Africa and includes stores in the Rest of Africa | 2 HEPS excludes the impairment of David Jones assets which saw the carrying value reduced by A$437.4m | Australian dividend was withheld

4. Woolworths Group Turnover
Reporting complicated by the 53rd week and IFRS standards
Adjusted 52:52 sales growth +3.9% to R78.2bn including concessions1, +4.6% excluding concessions
Impacted by tough trading conditions in both markets and continued structural changes overseas
Woolworths Retail (Food + FBH) contributed 63% to the Group’s sales4 . Sales growth +4.7% to R45.5bn (52:52) boosted by a significantly stronger H2
Online sales +28.7% contributing 1.0% to total sales
Group Turnover Performance (Adj 52:52)
Turnover growth Including Concessions
Comparable Growth
Turnover Growth
Excluding Concessions
Group
3.9%3 --
4.6%
Woolworths Retail
5.8%
4.7%
Woolworths Food
7.7%
5.4%
Woolworths FBH
1.5%
1.0%
David Jones 2
-0.8%
-0.1%
-0.2%
Country Road Group 2
0.5%
-0.6%
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 The impact of IFRS15 has been excluded, including IFRS 15 adjustment of R161m, Group turnover +4.1% | 4 Excluding concession

5. Woolworths Retail Turnover1
Woolworths Fashion, Beauty and Home (FBH)
Sales +1.5% to R13.9bn2
Much improved H2 with sales growth ahead of the market +5.5%, attributed to range improvements with focus on core and basics and better availability and strong growth in beauty with the roll out of high-end brands
Comparable sales growth +1.0% (H2: +4.7%)
Net trading space declining -0.1% and the Group focussing on operating efficiency
Internal price inflation +3.6%, fashion +2.5%. The Group expects internal food inflation to increase in FY2020 with H1 around +4.4% for FBH
Online sales growth +40.1% due to increased availability, online promotions and app capabilities
Woolworths Food
Continues to consistently deliver strong, ahead-of-market sales growth at +7.7% to R31.6bn2 with H2 growth +9.0%
High levels of investment in price, focus on value, innovation and convenience
Comparable store growth +5.4% (H2: +6.5%)
+2.0% net new space
Internal food inflation of +1.8% indicates strong volume growth reflecting the resilience of its more affluent customer base with competition heating up from Pick n Pay and Checkers. The Group expects internal food inflation to increase in FY2020 with H1 around +3.3%
Online growth strong +21.0% (FY2018: +17.6%)
SOURCE: Woolworths Holdings Ltd NOTE: 1 Concession sales are excluded | 2Adjusted for 52:52 weeks

6. Woolworths Australian Market Performance
Although the interest rate is low and job growth is strong consumers are under pressure due to high levels of debt, low wage growth, increasing non-discretionary costs and a slowing housing market with the economy slowing to 2009 recession levels. The apparel sector is considered highly competitive and promotionally driven. Shopping centres are seeing footfall, trade is declining and moving online. Competitors are closing their doors
Debt-laden David Jones fell “short of expectations”, while sales in the Country Road Group growth just +0.5%, with H2 slowing. Online brings a glimmer of hope
Country Road Group Performance
Country Road Group sales +0.5% in A$ with growth slowing in H2, fair performance that was in line with the market
Comparable sales growth -0.6%
Net decline in retail space -2.9% with further reductions planned2 as online expands
Online sales growth +12.9%, with online contributing 20.3% of sales with the platform reportedly working well
David Jones Performance
David Jones sales, including concessions , declined -0.8% in A$ with the Sydney refurb1 impacting sales, estimated at 3.0% for H2
Comparable growth -0.1% with net space +0.4% including 2 new stores. Plans are in place to reduce net space and improve the store portfolio’s productivity
Strong online sales growth at +46.8% since re-platforming, online now contributes 7.7% to sales with a 2020 target of 10% and 20% by 2025
System and structural changes are done, refurb estimated to be completed by March 2020
SOURCE: Woolworths Holdings Ltd
NOTE: 1 Refurb of Elizabeth Street store | 2 CRG has begun exiting Myer stores and by Sep 2019 will be exclusive to David Jones

7. Woolworths Financial Services Performance
Woolworths Financial Services (WFS) reported another solid performance in FY2019 with debtors book average growth +5.0% YoY to R12.3bn due to strong credit card growth and gains in store accounts and customer spend, FBH account spend reportedly increased
Net Interest income declined -3.1% to R1.5bn caused by repo rate adjustments and changes to IFRS1
Impairment charge declined -16.3% to R461m, attributed to the improved book shape, strong collections and post write-off recoveries, now at 3.7% of book
Annualised impairment rate was 3.7% under the IFRS 9 implemented at the beginning of FY2019 (Would have been 4.6% under the previous standard)
Woolworths’ card and credit card accounted for 15.1% of sales (23.9% of FBH and 11.3% of Food)
Operating costs +6.1% to R1.0bn including investment in customer acquisition campaigns, digital expansion and collection costs
Profit before tax +2.5% to R820m with return on equity at 33.2% (FY2018: 29.6%) due to lower minimum equity capital requirements in FY2018
Medium term target for return on equity for WFS is 27.5%
SOURCE: Woolworths Holdings Ltd
NOTE: 1 Changes were made to the accounting standards – IFRS 9 replaced IAS 39 , in FY2019 Total book value and impairment rate was restated to reflect performing and legal portfolios | Change from incurred to expected credit loss model | Changes in financial services assets, interest income, impairment charge and ROE | Day 1 adjustment – carrying value of WFS reduced by R217 million

8. Group Profitability Gross Profit
Group gross profit increased +2.2% to R27.5bn (52:52),
Growth +4.0% 53:52
Gross profit margin declining to 38.3% (52:52)
Woolworths Gross Profit (R’m) and Gross Profit Margin*
FY2019
Gross Profit (R’m)
YoY
Growth % (53:52)
FY2018 Gross Profit Margin
FY2019 Gross Profit Margin
Comment
Group
R27,964
4.0%
39.2%
38.3%
Woolworths Retail
R14,972
7.1%
32.2%
31.9%
Woolworths Food
R 7,980
8.7%
25.0%
24.8%
Maintained margin despite investment in price and promotional activity
Bolstered by volume rebates
Woolworths FBH
R 6,744
5.5%
46.7%
47.6%
Lower markdowns and less promotions
H2 gross profit margin 48.0%
Country Road Group
R 6,905
2.9%
62.8%
61.8%
Margin improved in A$ to 63.4%despite clearance
Improved margin from higher full-priced sales and improved sourcing
David Jones
R 6,087
-1.9%
42.9%
40.5%
Higher markdowns and aggressive clearance
Gross profit declined -11.1% YoY in A$ with gross profit margin at 36.0%
SOURCE: Woolworths Holdings Ltd
NOTE: *FY2019 is 53:52 weeks

9. Group Profitability (cont.)
Operating Profit
Operating profit declined -6.2% to R4.9bn (52:52), 53:52 decline -2.6% to R5.1bn
Operating profit margin declining to 6.9% (52:52), 53:52 at 7.0%, lower than FY2018: 7.7%, marking four years of declining operating profit margin
SOURCE: Woolworths Holdings Ltd
NOTE: Elizabeth Street store refurbishment is expected to be completed by March 2020 and trade will normalise from Q4 and the rental for Market Street of A$16 million p.a. will cease from FY2021

10. Group Profitability contd.
Operating Profit cont.
Woolworths Operating Profit (R’m) and Operating Profit Margin*
FY2019
Operating Profit (R’m)
YoY Growth (52:52)
FY2018 Operating Profit Margin
FY2019 Operating Profit Margin
Medium Term Operating Profit Margin Target
Comments
Group
R 4,934
-6.2%
7.7%
6.9%
Woolworths Retail
R 4,266
2.5%
9.6%
9.4%
Woolworths Food
R 2,283
5.4%
7.4%
7.2% 7%
Expense growth +7.5%, comp +5.5%
Store costs growth +7.6% with more space and volume
H2 operating profit growth higher +10.0% (H1: +0.6%)
Consistent operating profit margin over 7% for the last five years
Woolworths FBH
R 1,688
-1.1%
12.5%
12.1%
Over 14%
Expense growth +5.1%
Store costs +3.5%: new space, beauty roll out
H2 operating profit growth significantly higher +15.7% (H1: %)
Country Road Group
R 1,016
-1.6%
9.7%
9.9%**
12%
Expenses growth +2.3% in A$ including cost of Head Office move
Store growth +1.7% attributed to efficiency initiatives
Operating profit -2.9% in A$ with operating profit margin 9.3%
David Jones
R 378
-42.7%
4.6%
2.5%**
6 - 8%
Expenses growth +0.3% in A$
Store costs +1.9%, other costs -6.6% due to cost saving initiatives and structural changes made last year
Operating profit declined to A$37m with operating profit margin 1.7% (FY2018: 2.9%)
Higher depreciation and costs for the new Head Office and Food expansion included
SOURCE: Woolworths Holdings Ltd
NOTE: *52:52 weeks; except for ** | **53:52 | CRG and DJ reported in Rands , excepted in the comments where info is indicated as in A$

11. Group Operations | CAPEX
Group CAPEX increased +8.5% to R2.8bn in FY2019
This is lower than the R3.2bn initially indicated due to cutbacks, rollovers and deferrals of non-core expenditure
By Division:
Woolworths Retail CAPEX declined -1.0% to R1.1bn
Country Road Group CAPEX increased +7.7% to A$28m (FY2018: A$26m)
David Jones CAPEX declined -39.1% to A$42m (FY2018: A$69m | FY2017: A$63m)
Strategic initiatives +88.9% to A$102m for FY2019 (FY2018: A$54m), with a significant portion attributed to the Elizabeth Street refurb. FY2020 includes another A$81m
Future Planned CAPEX:
Planned CAPEX for FY2020 is R2.9bn, up +1.0% on FY2019
R1.3bn for Woolworths Retail
A$31m for CRG and A$41m for DJ
A$81m for strategic initiatives (mostly Elizabeth Street refurb)
Post FY2020 CAPEX is expected to normalise to around R2.5bn per year including A$55m for DJ and A$30m for CRG
CAPEX (R’m) and % Change
CAPEX
Growth % FY2019 vs FY2018
Group
R2,848m
8.5%
Woolworths Retail
R1,126m
-1.0%
Country Road Group
A$28m
7.7%
David Jones
A$42m
-39.1%
Strategic Initiatives
A$102m
+88.9%
SOURCE: Woolworths Holdings Ltd

12. % Contribution to Group
Group Operations | Inventory Levels
Inventory Level (R’m) and Inventory Level % Change
Inventory
Growth % FY vs FY2018
% Contribution to Group
Group
R8,325m
10.4%
Woolworths Retail
R4,235m
17.3%
51%
Country Road Group
R1,200m
1.3%
14%
David Jones
R2,890m
5.2%
35%
Inventory levels increased +10.4% to R8.3bn
Growth in inventory levels is attributed to:
Impact of space growth and new stores
Strategically higher stock levels in FBH to improve stock availability in core range and recover from ‘under-buy’ in FY2018
CRG and DJ stock levels reduced due to clearance of age stock
Inventories as a % of turnover reached a new high in FY2019 at 11.4% of sales (FY2018: 11.0%)
SOURCE: Woolworths Holdings Ltd

13. Group Operations | Internal Inflation and CPI
Internal inflation for Woolworths Food reported at +1.8% for FY2019, with higher price movement in H2 (H1: +1.2%)
Internal food inflation remains below the average CPI of food and non- alcoholic for the fourth consecutive year
FY2020 expectations for H1 at +3.3%
Internal inflation for FBH reported at +3.6% for FY2019 (H1: +1.7%)
Internal price inflation for fashion reported at +2.5% (H1: +0.8%)
CPI for the same period is averaged at 4.6%
FY2020 expectations for H1 at +4.4%
Internal Price Inflation
FY2015
FY2016
FY2017
FY2018
FY2019
FY2020 H1 Expectation
Woolworths Food
7.7%
6.7%
8.4%
3.2%
1.8%
3.3%
Woolworths FBH
6.2%
6.6%
0.8%
3.6%
4.4%
SOURCE: Woolworths Holdings Ltd, StatsSA

14. In Summary1
Woolworths Holdings presented a pleasing set of FY2019 results on the back of trying economic conditions and a challenged retailing environment
The positives:
Turnover (including concession sales) +3.9% to R78.2bn | +4.1% with IFRS adjustment
Turnover (excluding concession sales) +4.6% to R71.8bn
Woolworths Food sales growth consistently strong and ahead-of- market +7.7%, with comparable store sales +5.4% and good volume growth
Food operating margin on target (7%) despite investment in price
FBH sales recovered in H2 as ranging challenges cycle out of the business
Online is performing well across the divisions
The negatives:
Tough first half, recovery in H2 except for CRG
Structural changes and refurbishments overseas adding to pressure on sales and profit
Operating profit -6.2% to R4.9bn with operating profit margin declining from 7.7% to 6.9%
HEPS declined -4.6% to cents
NOTE: 1 adjusted 52:52 weeks for comparability

15. Outlook
Retailers continue to face tough trading conditions. South Africa’s growth expectation for 2019 is low, as have been the GDP results for the first half of the year, with growth below +0.5%. Domestic challenges, with fiscal constraints and low investment have been compounded by growing concerns over geo-political uncertainty, slowing global growth.
Looking forward, success for Woolworths, and indeed all South African FMCG retailers, must necessarily be judged against more muted measures. By keeping Food as its mainstay (whose winning recipe can hopefully be transported Down Under), sustaining and accelerating the turnaround in FBH and mitigating the effects of a tough Australian retail market, Woolworths looks set to deliver pleasing outcomes in the year ahead.

16. Carey Leighton. |. Associate Retail Analyst Adrienne Osberg. |
Carey Leighton | Associate Retail Analyst Adrienne Osberg | Retail Analyst