Woolworths is expected to write down its Australian subsidiary David Jones for about R 7 billion. Analysts say this is much less than what Woolworths initially paid to acquire the company.
Analysts say a R7 billion write off would be worth only one third of the value of Woolworths’ initial investment in David Jones. Woolworths is expected to release dismal results in 3 weeks time due to the losses incurred in David Jones and the Woolworths clothing line in South Africa.
Headline earnings per share are expected to drop by between 12 to 17 %. However, the company’s food sector, which has been performing well over the years, is expected to have even better results.
Over the past few days Woolworths’ share price has improved significantly as a result of the confidence the market has in retail stocks.
Earlier this month, Woolworths Holdings Limited said group sales for the first 26 weeks of the 2018 financial year increased by 2.5% over the previous period.
The company said in South Africa, Woolworths Fashion, Beauty and Home sales decreased by 0.2 %, with comparable store sales 3.4% lower, while Woolworths Food sales increased by a market-leading 9.4 percent, against a 5.3 percent rise in comparable store sales.
“In Australia, David Jones’ sales performance improved in the last 6 weeks of the half, with sales increasing by 0.6% in comparable stores,” the company said.
“For the half year sales were 3.3% lower on a comparable basis and 3.8% lower in total, which is an improvement on the 20 week performance.”
Country Road Group sales increased by 5.2 percent, against a 1 percent decline in comparable stores.
Woolworths said headline earnings per share for the 26-week period ended December 24, 2017 were expected to be 12.5 to 17.5 percent lower at between 200.1 and 212.3 cents, compared with 242.6 cents in 2016.
The Group’s interim results for the 26-week period ended 24 December 2017 are scheduled to be announced on or about February 22.
-Additional Reporting ANA
