Woolworths Holdings Limited · JSE:WHL
Woolworths — Investor Presentation (October 2007)
45 slides from Woolworths's investor presentation, October 2007
Slide 1: International investor update, October 2007
2007 October International investor update
Slide 2: Presentation index
presentation index 1. Introduction – South Africa 2. Core business – Woolworths heritage – Business overview – Selling formats – Woolworths Food – Woolworths Clothing, Home and Beauty – Woolworths Financial Services – Country Road 3. Prospects
Slide 3: The South African economy is a stable growth economy
the south african economy is a stable growth economy • 2006 GDP growth 5.0% p.a. (2007 first half: 4.5% p.a.) • Trade deficit of 6.5% • Prime interest rate at Aug 2007 of 13.5% • Inflation (CPIX) rate at Aug 2007 of 6.3% South Africa: prime, inflation and exchange rate • Average exchange rate $/R7.2
Slide 4: But short-term headwinds are expected
but short-term headwinds are expected • Consumer spending to slow down, resulting in a more pronounced impact on retail sales in the second half of 2007 – Rising inflation - particularly in food – Fuel price increases – Interest rate pressure – increase of 3% during the last year – Impact of Nationa
Slide 5: Established 76 years ago, Woolworths is a respected household name
established 76 years ago, today woolworths is a respected household name • Founded in 1931 • Relationship with Marks & Spencer • Proud to be South African
Slide 6: Our unique proposition is the value of our single-brand philosophy
our unique proposition is in the value of our single-brand philosophy the difference – the golden thread • Single-brand philosophy • Positioning built on trust • An obsession with quality and value for money, innovation and a healthy lifestyle
Slide 7: Retailing clothing, beauty, homeware and food and providing financial services
our business is in retailing a selected range of clothing, beauty products, homeware and food and providing financial services • Revenue of R18.6bn/$2.6bn (2006: R15.1bn/$2.4bn) • Operating profit of R1.8bn/$249m (2006: R1.5bn/$230m) • Operating margin of 9.9% (2006: 9.8%) • Headline earnings per sh
Slide 8: Our ROE continues to add significant value
our ROE continues to add significant value 40% 35.1% 34.8% 33.5% 35% 27.4% 30% 24.7% 25% 18.3% 20% 17.5% 15% 16.3% 10% 12.3% 13.8% 13.8% 13.3% 11.3% 11.8% 5% Jun 01 Jun 02 Jun 03 Jun 04 Jun 05 Jun 06 Jun 07 roe wacc • Interest rate increases have increased our WACC
Slide 9: HEPS reflects compound growth of 24.8% over five years
our HEPS reflects compound growth of 24.8% over the last five years 130 4 120 3.5 110 100 3 90 80 2.5 70 2.1 2.0 127.8 2 60 1.7 1.7 1.7 50 105 1.5 89.4 40 75.5 30 61.1 1 20 0.5 10 29.0 38.5 54.0 63.0 76.0 Jun 03 Jun 04 Jun 05 Jun 06 Jun 07 HEPS DPS Dividend cover
Slide 10: Consistent turnover growth in food and clothing over five years
woolworths has shown consistent turnover growth in both food and clothing in the past five years Rm 17 376.9 18 000 +38.1% 16 000 14 208.0 14 000 12 220.7 -0.1% 12 000 10 648.8 +5.2% 9 500.3 25.6% 10 000 12.8% 22.5% -4.4% 8 000 19.4% 19.2% 6 000 20.6% 4 000 16.2% 11.6% 12.4% 12.0% 2 000 11.6% Jun 03
Slide 11: 345 Woolworths stores and 131 Country Road stores/concessions
we have 345 woolworths stores and 131 country road stores/concessions locally and internationally Woolworths: • 200 corporate stores – 98 full line stores – 5 clothing and home stores – 97 food stand-alone stores • 103 franchises (including 24 Engen foodstops) • 42 international franchises • Total t
Slide 12: Aggressive store roll-out strategy, 51 new corporate stores
we are following an aggressive store roll-out strategy, with 51 new corporate stores opened in the last two years 0 - 1 years, 26 stores 1 - 2 years, 25 stores Woolworths corporate stores maturity profiles 5+ years, 111 stores 2 - 3 years, 13 stores • 43 new corporate stores planned for 2008 3 - 4 y
Slide 13: Woolworths Food
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Slide 14: Food business is a premium, value-added offering for the upper-end market
our food business is a premium, value-added offering targeting the upper-end market Target Market LSM 10 Woolworths Food Checkers Spar Pick ‘n Pay Discount Value-add Shoprite Massmart LSM 1
Slide 15: UCUCIU Upon DE rss,
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Slide 16: Food business strives to offer value-added, innovative products
our food business strives to offer value-added, innovative products of outstanding quality in convenient locations • Consolidate our successes – Dominate key categories and plan to maintain dominance eg fresh produce – Focus on convenience – Manage inflationary pressures – value for money – Good foo
Slide 17: Food has had strong consistent growth in sales and market share
our food has had strong consistent growth in sales and market share Food Rm 10 000 10.0% 9.2% 8.5% 8.0% 8 000 7.4% 8 718.0 8.0% 7.0% 6 941.5 6.0% 6 000 5 666.0 4 000 4 747.1 4.0% 3 980.8 2 000 2.0% 0 0.0% Jun 03 Jun 04 Jun 05 Jun 06 Jun 07 Turnover (Rm) Market share (%)
Slide 18: Food trading densities are at an all-time high
food trading densities are at an all-time high R/m² 90 000 80 187.6 80 000 74 673.0 70 000 68 782.9 7.4% 62 518.2 8.6% 60 000 56 793.5 10.0% 10.1% 50 000 12.3% 40 000 30 000 20 000 10 000 0 Jun 03 Jun 04 Jun 05 Jun 06 Jun 07 Turnover/m²
Slide 19: Food sales fuelled by investment in additional retail space
food sales are further fuelled by investment in additional retail space Projected Jun 06 Jun 07 % change Jun 08 % change 2 2 2 m m m Food trading space 97 065 108 845 12.1% 133 082 22.3% Corporate 87 192 98 282 12.7% 121 230 23.3% Franchise SA (excl Engen) 6 357 7 046 10.8% 7 843 11.3% Franchise Eng
Slide 20: Opportunity in increasing spend of aspirant middle and upper-end market
the opportunity is in increasing the spend of the aspirant middle market and upper-end market kvi and 9.2% market share new stores food clothing and home financial services LSM 6 7 8 9 10 • Strong growth from LSM 9 - 10 and aspirant LSM 6 - 8 over next five years • Drive cross-shop experience • Incr
Slide 21: Woolworths clothing, home & beauty
woolworths clothing, home & beauty
Slide 22: Clothing, home and beauty offers key wardrobe building blocks at affordable prices
our clothing, home and beauty business offers key wardrobe building blocks at affordable prices to the aspirant middle to upper market Target Market LSM 10 Truworths Woolworths clothing & general merchandise Foschini Mr Price Value Edgars Fashion Product Offering Jet Pep/Ackermans LSM 1
Slide 23: WOOLWORTHS HOLDINGS snare | L
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Slide 24: Key strategy is design-led, strategic sourcing process
our key strategy is to implement the design-led, strategic sourcing process and deliver the value proposition of innovation, quality and price • Consolidate our successes – Large market share ranges – headquarters assortments – The heart of our business – Should grow, at least, in line with market g
Slide 25: Focus on innovation, quality and price is growing sales and market share
our focus on innovation, quality and price is growing sales and regaining market share Clothing, home and beauty Rm 8 000 17.0% 16.8% 7 000 16.3% 16.5% 6 985.0 6 000 6 012.2 16.0% 5 000 5 349.5 4 792.2 15.6% 15.5% 4 000 15.5% 4 280.4 15.1% 3 000 15.0% 2 000 14.5% 1 000 0 14.0% Jun 03 Jun 04 Jun 05 J
Slide 26: Clothing and footwear market growth 12.5% while Woolworths grows 15.9%
annual growth for the clothing and footwear market is 12.5%, while Woolworths is growing at 15.9% CLOTHING AND FOOTWEAR Percentage Growth - Industry & Woolworths WW Market Share (12mma) 18.00% 16.00% 14.00% Percentage Growth 12.00% Market Share 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% Dec2006 Dec2005 Ju
Slide 27: Our trading space is better utilised every year
our trading space is better utilised every year Clothing, home and beauty R/m² 25 000 23 636.1 20 457.3 21 224.9 19 540.0 11.4% 20 000 18 230.4 3.8% 7.2% 4.7% 10.7% 15 000 10 000 5 000 0 Jun 03 Jun 04 Jun 05 Jun 06 Jun 07 Turnover/m²
Slide 28: Still investing in additional footage
yet we are still investing in additional footage Projected Jun 06 Jun 07 % change Jun 08 % change m2 m2 m2 Clothing, home & beauty trading space 325 302 337 027 3.6% 363 066 7.7% Corporate 239 008 249 365 4.3% 270 451 8.5% Franchise SA 53 125 57 276 7.8% 60 736 6.0% Franchise International 33 169 30
Slide 29: Product and customer segmentation work completed
initial work completed on product and customer segmentation to create a deep and multi-dimensional understanding of our customer lifestyle food fashion price tiering good healthy convenience better best shopping loyal habits classic merchandise opportunity classification modern one-off contemporary
Slide 30: Internal sub-brands aligned to customer segmentation model
we have aligned our internal sub-brands to reinforce our customer segmentation model but more than 65% of customers are still targeted by our main ranges Classic 50% Modern 30% Contemporary 20% Best 20% Better 40% Main range Main range Good 40% Main range Main range Brands womenswear – Exclusive bra
Slide 31: Opportunity in attracting upper-end customer and driving cross-shop
the opportunity is in attracting the upper-end customer and driving the cross-shop experience food w-collection 15.5% market share clothing and home beauty financial services LSM 6 7 8 9 10 • Strong growth from LSM 9 – 10 and aspirant LSM 6 – 8 over next five years • LSM 9 – 10 taste-levels, accessi
Slide 32: Woolworths financial services
woolworths financial services
Slide 33: Strategy is to attract new customers and offer ancillary products
our strategy is to attract new customers and offer ancillary products • Integrated loyalty programme for all customers to drive cross-shop – Store card to target LSM 6 – 8 (relatively unbanked) – Personal loans to target store card customer – Visa card to target upper half of customer base • Sweat t
Slide 34: Financial services offers a suite of products to customers
our financial services business offers a suite of products to existing and new customers • Product mix of R5.5bn/$769m book • Store card Gross Financial Services Books • Personal loans VISA card, R978.2m • Visa credit card • Two million customers • Net bad debt 4.9% • Average yield of 19.9% on gross
Slide 35: Healthy yields on an increasing book
we maintain healthy yields on an increasing book Rm 23.7% 24% 6 000 19.3% 19.9% 20% 18.6% 19.0% 5 000 5 850.1 16% 4 000 4 668.5 3 785.4 12% 3 000 3 063.5 2 000 8% 2 353.6 1 000 4% 0 0% Jun 03 Jun 04 Jun 05 Jun 06 Jun 07 Gross combined book value (Rm) Yield (%)
Slide 36: Non-interest revenue shows strong growth driven by insurance
non-interest revenue shows strong growth driven by insurance products Rm 200 180 59% 160 172.2 140 120 37% 100 108.0 80 46% 78.6 60 48% 63% 54.0 40 36.4 20 Jun 03 Jun 04 Jun 05 Jun 06 Jun 07 Non-interest revenue (Rm)
Slide 37: 4.5 million customers: a card for all
4.5 million customers: a card for all ? swipe card myschool card In-store card classic VISA card gold VISA card premium swipe card 314 000 394 000 1 600 000 140 000 29 000 credit card 314 000 personal loans non-interest revenue products eg insurances MySchool, loyalty programme and direct marketing
Slide 38: Opportunity in providing customers with in-house credit
the opportunity is in providing our customers with in-house credit food clothing and home opportunity financial services opportunity LSM 6 7 8 9 10 • Loyalty and community investments • Increase market penetration
Slide 39: Country Road
country road
Slide 40: Consolidate and grow Country Road's retail-only business
consolidate and grow country road’s retail-only business • Continued focus on accessibility of the brand – quality, style and value • Spread existing catalogue into the chain and expand ranges to include sleepwear , swimwear and sweats • Successful exit of wholesale • Slow start with concession – mo
Slide 41: Rolling out retail store opening programme in 2008
we will be rolling out our retail store opening programme in 2008 Projected Jun 06 Jun 07 % change Jun 08 % change 2 2 2 m m m Country Road trading space 22 967 31 548 37.4% 35,460 12.4% Retail stores 22 967 23 523 2.4% 26 894 14.3% Concession stores - 8 025 100.0% 8 566 6.7% Projected Jun 06 Jun 07
Slide 42: Prospects
woolworths prospects
Slide 43: Tougher trading environment ahead, fundamentals remain strong
we expect a tougher trading environment ahead – however fundamentals remain strong in the medium and long term • Short-term trading environment headwinds – Continued impact of interest rate increases – Continuing inflationary pressures – Pace of credit growth to slow mainly as a result of NCA – Pres
Slide 44: Woolworths remains a premium retailer with defensive positioning
woolworths remains a premium retailer with a defensive positioning • Most trusted, respected retail brand in South Africa • Exposure to growing aspirant market • Exciting organic growth opportunities • Strong cash-generative ability
Slide 45: Forward-looking statements
• This presentation may contain forward-looking statements, including “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995. These forward-looking statements are based upon current expectations and assumptions regarding anticipated deve
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