Woolworths Faces Profit Pressure as Fashion and Australian Business Struggle

Woolworths’ latest financial results for the first half of 2025 paint a mixed picture—while its Food division remains a top performer, struggles in Fashion, Beauty, Home (FBH), and its Australian-based Country Road Group (CRG) have impacted overall profitability.

Despite strong turnover growth of 5.7%, the group’s bottom line took a hit due to weak apparel sales, transformation costs, and pressure on gross profit margins.

South African Market: Strong Food Sales, Apparel Setbacks

In South Africa, Woolworths’ food segment continued to shine, with turnover and concession sales rising by 9.1%, driven by increased availability and positive volume growth.

• Food sales (excluding Absolute Pets) grew 9.0%, contributing to market share gains.
• Woolies Dash saw a 49.2% surge in sales, while total online food sales grew 37.2%.
• Gross profit margin in food improved by 30 basis points to 24.9%.

However, the FBH segment suffered due to supply chain disruptions at its Distribution Centre, resulting in delayed stock arrivals and reduced availability during the peak festive season.

• FBH turnover and concession sales grew just 2.5%, with comparable-store sales rising by 2.7%.
• The Beauty segment was a standout, delivering 17.3% growth.
• However, gross profit margins in FBH declined by 170 basis points to 46.3%, with adjusted operating profit dropping 17.7% to R763 million.

Woolworths Financial Services (WFS) also saw a 3.7% decrease in its loan book, though impairment rates improved.

Australian Market: Country Road Group in Crisis

Country Road Group (CRG), Woolworths’ Australian apparel business, is undergoing an accelerated restructuring following a 6.2% sales decline.

• Comparable-store sales fell by 7.8%, hit by weak consumer spending and heavy discounting.
• Increased promotional activity and a weaker Australian dollar led to a 320bps drop in gross profit margin to 58.9%.
• Adjusted operating profit fell by a staggering 71.7% to A$14.2 million, with operating margins shrinking to 2.6%.

Profit Boost from David Jones Sale, But Earnings Drop

Woolworths’ sale of the David Jones Melbourne property for A$223.5 million (R2.6 billion) provided a temporary earnings boost. This sale contributed to a 20.9% increase in earnings per share (EPS) to 245.4 cents.

However, headline earnings per share dropped by 24% to 152.8 cents, and the interim dividend was slashed by 27.7% to 107 cents per share.

Can Woolworths Regain Profit Momentum?

With discretionary spending under pressure in both South Africa and Australia, Woolworths faces an uphill battle in reviving its apparel business. While the Food division remains resilient, FBH and CRG will require effective restructuring to restore profitability.

As inflation moderates and interest rates ease in South Africa, consumer sentiment may improve, providing a potential uplift in the coming months. However, Australia’s economic challenges continue to pose a significant risk.

Woolworths’ next financial update will be crucial in determining whether its transformation efforts are paying off—or if further restructuring is needed to sustain long-term growth.

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