Earnings Warning Highlights CRG Struggles and Big Impairment
Major blow for Woolworths as the retail giant warns of a significant decline in earnings for the 2025 financial year. Despite positive sales growth, the company faces financial challenges largely due to difficulties within its Australia-based Country Road Group (CRG) and an impairment charge that has negatively impacted results.
This development signals a challenging year for the group and its shareholders, highlighting the pressures of a tough retail environment in both South Africa and Australia.
Earnings Warning Amid Financial Results 2025
In a recent trading statement, Woolworths announced that while turnover and concession sales increased by 6.1% and by 6.8% on a constant currency basis, the overall financial picture is concerning.
The group expects basic earnings per share (EPS) to decline by around 5%, falling within the range of 263.4 to 277.3 cents per share. However, the bigger blow comes in headline earnings per share (HEPS), which is forecast to drop between 22% and 27%, landing in the range of 257.2 to 274.8 cents per share.
This marks one of the steepest declines in recent years for the retailer, underscoring the Woolworths earnings decline narrative dominating financial discussions.
Country Road Group Impact Hits Hard
The primary factor behind this major blow for Woolworths is the underperformance of its Country Road Group (CRG) business in Australia.
While Woolworths successfully disposed of a flagship investment property that houses David Jones for A$223.5 million (recognizing a profit of R792 million), the CRG business faced a weaker topline environment, diluted gross profit margins, and significant negative operational leverage during the second half of the year.
To make matters worse, after reassessing the carrying value of certain brand assets within CRG, Woolworths recognized an impairment of R917 million, which had a severe negative impact on the group’s overall earnings.
This illustrates the scale of the Country Road Group impact, which continues to weigh heavily on the company’s international strategy and profitability.
Key Metrics for Financial Results 2025
| Metric | 2024 Reported (cents) | Expected Change (%) | 2025 Expected Range (cents) |
|---|---|---|---|
| Earnings per share | 277.3 | -5% to 0% | 263.4 to 277.3 |
| Headline Earnings per Share (HEPS) | 352.3 | -22% to -27% | 257.2 to 274.8 |
| Adjusted HEPS | 375.4 | -17% to -22% | 292.8 to 311.6 |
These figures emphasize the severity of the current financial downturn facing the group.
South African Retail Performance Provides Relief
Despite the challenges in Australia, Woolworths’ South African retail performance offered some positive signs. The local business managed to deliver strong turnover and concession sales growth of 9.4%, showing resilience despite subdued consumer sentiment and a tough macroeconomic climate.
The food business performed exceptionally well, with above-market growth of 11.0% in turnover and 7.7% on a comparable-store basis. Price movement for the period averaged 5.3%, supported by positive volume growth, an increase in customer traffic, and larger basket sizes.
Food sales rose by 9.2%, excluding contributions from Absolute Pets, which was acquired in Q4 FY24. Digital channels also showed robust growth:
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Woolies Dash surged by 41.6% in FY25.
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Overall online sales increased by 32.9%, contributing 6.6% to total food sales.
Fashion, Beauty, and Home (FBH) Segment
The FBH division also delivered incremental improvements, with turnover and concession sales growing by 4.7% and 5.1%, respectively. The beauty category was a standout performer, recording an impressive 14.7% growth, reaffirming Woolworths as a leading beauty destination in South Africa.
Online sales for FBH grew by 22.8%, contributing 6.6% to the segment’s total revenue, reflecting the continued strength of e-commerce in South African retail.
Financial Services and Impairment Trends
The Woolworths Financial Services book decreased by 2.7% year-on-year, primarily due to the sale of part of the legal book worth R1.6 billion. Excluding this, the portfolio recorded a slight increase of 0.5%.
Encouragingly, the impairment rate improved to 6.1%, down from 7.0% in the prior period, indicating better credit risk management despite a constrained consumer environment.
What Does This Mean for Investors?
The major blow for Woolworths presents a complex picture for investors. On one hand, South African operations—especially in food and beauty—continue to perform strongly, supported by digital innovation. On the other, the Country Road Group impact and associated impairments have significantly overshadowed these positives, leading to steep declines in headline earnings.
The coming months will likely see Woolworths focusing on stabilizing its Australian operations and maximizing growth in its home market to offset the international challenges.
Final Thoughts – Can Woolworths Bounce Back?
While Woolworths remains a strong brand in South Africa with a loyal customer base and robust food division, the financial headwinds created by CRG will require strategic recalibration. The group’s focus on digital expansion, premium food offerings, and beauty category growth may provide some cushion against the broader challenges.
However, investors and analysts will be watching closely to see how management addresses the persistent profitability issues within its international portfolio. Until then, the phrase “major blow for Woolworths” will dominate headlines in the retail and investment space.
