Woolworths’ New CEO Prioritizes Food Sector, Leading to Profit Decline

Woolworths is refocusing its operations on its premium food sector in South Africa, placing its top-performing division at the core of the organization as the new CEO, Sam Ngumeni, aims to stimulate growth following a downturn in annual profits.

The retailer, based in Cape Town, announced that its “market-leading premium food ecosystem” will serve as the main driver of value creation, leveraging beauty and home products to deepen its relationship with grocery consumers within a wider lifestyle context. This strategic pivot comes as Woolworths grapples with underwhelming performance in the fashion segment and continues its efforts to rejuvenate its Australian Country Road Group.

According to its report on Wednesday, profit attributable to shareholders decreased by 5.1% to R2.3 billion for the fiscal year ending in June.

Woolworths share price 

The South African food division stood out as the top performer, with annual sales increasing by 5.6% and revenue from its grocery delivery service soaring by nearly 20%. In contrast, sales growth in its clothing, beauty, and home categories slowed to 2.6% in the latter half of the year, as greater discounting and clearance of surplus inventory exerted pressure on margins.

This strategy is further reinforced by Woolworths’ planned acquisition of food manufacturer in2food, which was revealed in March and is still pending regulatory approval. This deal would bring one of its largest suppliers in-house, enhancing the retailer’s control over its food supply chain as it prioritizes the food division in its growth strategy.

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Ngumeni, an experienced Woolworths leader who became CEO in June, faces pressure to enhance performance within its fashion, beauty, and home division due to diminished demand and increased discounting that has compressed margins in the latter half of the year. He has already revamped the group’s management framework and has recruited veteran executive Manie Maritz to head the struggling division, with Maritz delaying his retirement to assume the role.

Country Road Group, Woolworths’ Australian apparel division, reported “modest” sales growth and achieved profitability after showing signs of stabilization earlier in the year.

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