South Africa’s Woolworths on Wednesday scrapped its 2020 dividend and said it was reviewing its Australasian property assets as the retailer battles tough conditions created by the COVID-19 pandemic.
Non-food retailers globally have been heavily impacted by lockdowns and face a grim future in the near term as consumers cut discretionary spending to cope with the economic fallout of the pandemic.
Woolworths said the pandemic’s toll on its business had deepened, with turnover and concession sales dropping 18.5% in the nine weeks to April 26, sending its shares down 4.6%.
It said the health crisis had affected performance in all its markets – South Africa, Australia and New Zealand.
Woolworths has hired UBS Australia to review its Australasian real estate portfolio.
It said talks were under way with Australasian landlords on “accelerated restructure” and reduction in floor space for its struggling fashion brand David Jones.
The retailer, which warned in April that full-year profits would fall by more than 20%, said the tough conditions were likely to continue for the “foreseeable future”.
“The board will … not declare a final FY20 dividend and will consider dividends thereafter in the context of the conditions prevailing at the time,” the company said.
It reiterated that it was working to protect the group’s financial position, improve its liquidity and capital structure and re-position the business towards long-term shareholder value.
The firm was also talking with its lenders about the potential impact of the coronavirus-related slowdown on its debt covenants, and had secured or was seeking the suspension of covenant testing from lenders to the Australasian businesses.
The group could extend up to more than R 1.58 billion in funding support, in the form of a loan, to those units if successful, it said.