Woolworths has placed its fashion business and struggling Australian business Country Road Group (CRG) among the top three risks facing the group, with management laser focused on turning the businesses around.
In its latest annual report published on Tuesday, the retailer said challenges such as inconsistent product availability, rising global supply chain uncertainty and intensifying competition from online discount retailers continue to weigh on its fashion business performance.
The company admitted that execution missteps in the first half of the financial year forced higher levels of stock clearance and drove up supply chain costs, eroding profitability.
While Woolworths completed the second and final phase of its fashion, beauty and home (FBH) turnaround — which included value chain transformation, new planning systems, expanded distribution capacity and the rollout of radio-frequency identification technology — it is now shifting its focus to “sustainably improving” the business, it said.
The retailer is betting on must-win fashion categories, a quality reset programme, targeted price investment and the rollout of new formats such as its smaller WEdit stores to keep momentum.
CEO Roy Bagattini, in his letter to shareholders, said the changes have already lifted winter ranges to double-digit growth in the final quarter, with Woolworths gaining market share in fashion.
The group has appointed Nuholt Huisamen as CEO of FBH as of September, after the early retirement of Manie Maritz in what Bagattini called a key leadership transition to support growth.
Huisamen, like Bagattini, is a former executive at Levis. CRG endured what Bagattini described as the most difficult year in its history amid weak consumer demand and heavy discounting.
An accelerated separation from David Jones and a wholesale restructuring of CRG’s operating model weighed on earnings, though Woolworths says the reset has positioned the business for long-term growth.
“Whilst this restructuring negatively impacted short-term earnings, it was a critical step in resetting CRG’s structural economics and positioning the business for longer-term growth,” he said.
Bagattini highlighted the growth of the beauty and home segments, with beauty turnover nearly tripling in recent years and now playing an important role in cross-shopping, loyalty and customer spend.
“Our beauty business has almost trebled over the past few years. In the process, it has become an increasingly important driver of customer cross-shop, loyalty and spend, supported by private label innovation in our WBeauty range and the extension of leading international brands.”
The group said it expects recovery in FBH as it strengthens product planning and execution.
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