The upscale South African retail company Woolworths has had an excellent year so far with its food retailing performing particularly well. We have been of the view for some time that its food retailing business, while relatively more exposed to any slowdown in consumer spending given its inherent focus on the top-end of the market, was not going to be as affected by the shifting dynamics of the wider industry brought on by the arrival of Walmart, which we believe poses a more direct threat to lower-priced rivals such as Shoprite, Spar and Pick 'n Pay. In its full fiscal year to June 2012, Woolworths' food retail division recorded sales growth of 11.9% year-on-year.
|Coming Back Well After Dip.|
|South Africa Organised Food Retail Sales Growth (% change y-o-y based on local currency) - Historic & Forecast - 2002-2016|
Over the past year, Woolworths' share price has increased by more than 80%, outperforming Shoprite on the Johannesburg FTSE All-Share Index. Going forward, it is believed that Woolworths is aiming to make strides to also position itself to take advantage of the growing demand for organised retail across some of the country's lower-income towns and neighbourhoods without compromising its upscale core focus elsewhere. With about 35% of food retail sales still accounted for by the informal sector, there is plenty of room for growth in South Africa.