Woolworths Feels the Heat as Country Road Woes Cut Deep into Profits

Australia drags while SA food and beauty push back, but it may not be enough

Woolworths has issued a sobering warning to investors: profits for the 2025 financial year are expected to take a sharp knock, with headline earnings per share plunging as much as 27%. The culprit? A perfect storm of global pressures, underwhelming returns from its Australian business, and a massive R917 million brand impairment.

It’s a gut-punch moment for one of South Africa’s most iconic retail groups.

Country Road: The Luxury That Backfired

At the centre of Woolworths’ headache lies the Australia-based Country Road Group (CRG), a once-hopeful investment now weighing heavily on the balance sheet. The group had to write down the value of certain CRG assets to the tune of nearly a billion rand a brutal blow that torpedoed any hopes of stable earnings this year.

CRG faced weak sales, shrinking gross profit margins, and what Woolworths called “negative operational leverage” code for the bottom falling out when revenues don’t keep pace with fixed costs. Add a volatile global trade climate to the mix, and it’s no wonder CRG is bleeding red.

Even the disposal of a flagship David Jones property for A$223.5 million couldn’t balance the scales. Sure, it brought in R792 million in profit, but that was swiftly wiped out by the CRG impairment.

Woolies Still Wins at Home, Mostly

Despite the Australia saga, Woolworths South Africa is showing some resilience.

In a retail environment where many South Africans are tightening belts amid stubbornly high living costs, Woolies Food continues to shine. Turnover and concession sales jumped 9.4%, outpacing much of the market. Excluding its recent acquisition of Absolute Pets, food sales were still up 9.2%, with strong online growth of nearly 33%.

The group’s online delivery platform, Woolies Dash, exploded with 41.6% growth, proof that digital convenience is gaining serious traction in Mzansi.

On the style front, the Fashion, Beauty, and Home (FBH) segment saw more modest growth. While fashion inflation barely moved at 0.4%, the Beauty business was the star performer, surging 14.7%. “Woolies is becoming the go-to beauty destination in SA,” the group boasted and judging by the shelves at flagship stores, they’re not wrong.

Still, it wasn’t all rosy. Woolworths Financial Services, long a stable earner, saw its book shrink by 2.7%. But there’s a silver lining: the impairment rate improved from 7% to 6.1%, showing better credit control even as consumers battle to stay afloat.

Public Sentiment: Woolies’ Loyalists vs Cynical Shoppers

On social media, the reaction to Woolworths’ earnings warning has been mixed.

One X user posted:

“Woolies could lose a billion in Australia and still sell me a packet of grapes for R80. They’ve mastered the art of bougie guilt.”

Another chimed in:

“If they focused more on fixing local store stock issues than fancy Aussie brands, we wouldn’t be here.”

Loyal customers, however, continue to defend the brand, especially its food quality and delivery experience.

A Familiar Pattern?

Woolworths’ foray into Australia has raised eyebrows for years. The David Jones saga has been well-documented an expensive lesson in trying to transplant South African retail DNA into a very different market. Now, CRG seems to be singing the same sour tune.

As Woolies works to streamline operations and reduce trading space in SA by 2.3%, the group appears to be recalibrating, perhaps too slowly.

The Bigger Picture

With earnings per share expected to fall between 263.4 and 277.3 cents down from last year’s 277.3 and adjusted headline earnings likely dipping as much as 22%, it’s clear that Woolies is feeling the pinch.

Yes, local food and beauty segments are holding the line. But unless the CRG situation turns around or Woolworths makes some bolder, swifter decisions, the glamour of high-end retail could continue to lose its shine.

For now, South Africa is carrying the brand. But for how long?

{Source: BusinessTech}

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