Country Road, take Woolies home — gourmet gains at home, fashion pains abroad

There are indulgences and then there are R9,999, 8kg prosciutto hams. Woolworths has imported 250 of them from Italy, of which 40 have already been sold, complete with knife and chopping board. 

CEO Roy Bagattini recalled one particular request from a customer last week. “I got an email from a customer who said:  ‘Mr Baggatini, I’m writing directly to you. It’s my husband’s birthday. I need to give him something super special. I want the R10,000 ham. Can you please help me? I don’t know where to get it’.” The ham, he added, was delivered to the customer that same afternoon. 

Some consumers, however, have been hamming it up on social media. 

@llewellyn_brendon_nel10k!!!♬ original sound - Llewellyn Brendon Nel

While the prosciutto has raised eyebrows and led to laughs of disbelief in some income groups, it does prove the point of a brand chasing loyalty in the premium lane. The group’s turnover rose 6.1% to R81-billion this financial year, but its profit before tax fell by 14.4% to R3-billion. 

Read more: After the Bell: Health by Discovery, breakfast by Woolies and the upper-middle-class escape from reality

Earnings per share slipped 1.4% to 273.4 cents, and dividends per share fell by 29% compared with the previous year. 

Shopping as sport and spectacle 

With a focus on revamping and redesigning its brick-and-mortar stores, the company has leaned into South Africa’s shopping culture. 

“As South Africans, I think it’s in our culture where people still want to touch and feel, still want to come in and connect, still want to go on a little outing,” said Lindiwe Khumalo, Woolworths’ head of store design. 

The result has been Woolies’ investment in “next gen” stores – the first of which is the newly revamped Tyger Valley branch. A proud Bagattini called it “probably close to being the best in the country” across categories from food to fashion. 

The strategy seems to be paying off. Woolworths Food revenue grew to R51.4-billion from R47.3-billion a year earlier, with gross profit margins edging up to 24.9%. The stores are pulling in new, younger black urban consumers, Bagattini said, while loyal shoppers are spending more. 

Read more: Key trends reshaping South African consumer behaviour in the grocery market

While the aisles are alive with browsers, another customer is tapping away on their phone. Woolies Dash, the company’s on-demand delivery service, delivered sales growth of 41.6%. Online food sales now make up 6.6% of the division’s total. 

“The Dash business for us is an opportunity, and we are seeing it bring in a lot of younger, new customers into the brand,” Bagattini said. Dedicated dark stores — warehouses set up exclusively for online orders — are now a core part of the model. One already runs in Cape Town, with more on the way. 

Competitors at the gate 

Woolworths’ reign over premium food retail is no longer uncontested. Checkers FreshX has muscled in, growing sales by 13.8% with stores that feature wine cellars, spice bars, Starbucks outlets and doughnuts from Krispy Kreme. 

“We remain of the view that Checkers’ incredible success in terms of its vision to democratise premium food retail, remains underrepresented in the South African market,” Shoprite CEO Pieter Engelbrecht said earlier this month, commenting on the group’s financial results. “Our strategy to continue the conversion of existing stores to our winning FreshX format whilst opening new stores in areas [where] we are underrepresented remains one of our top priorities over the medium term.” 

Read more: The Finance Ghost: Boxer vs Woolworths — The power of focus

Spar has also entered the fray. Its Gourmet store format targets affluent customers in urban and high-end residential areas, a Spar 2025 financial presentation states. The first Spar Gourmet stores are expected to open later in 2025, with a vision of establishing about 30 to 40 such outlets, BusinessTech reported.

Pets are family (and business) 

As competition heats up in food, Woolies has taken command of another lucrative niche: pets. The group acquired Absolute Pets in 2024 and with more than 250 locations between the two brands, it has given Woolworths a powerful foothold in the sector. 

Read more: Woolworths given free rein to collar Absolute Pets

“This is a category that we are very focused on. It’s quite competitive. We’re seeing a lot of others pour into it, but you really have to have a differentiated proposition. It is unbelievable what money people spend [on their pets], and there’s been a fundamental shift in that. I think it’s a forever shift and something that we really want to capitalise on,” Bagattini says.

Absolute Pets added R259-million in revenue and R15-million in profit before tax in just three months post-acquisition.

The Australian albatross 

The same can’t be said for the group’s fashion business in Australia. Bagattini admits the Country Road Group (CRG) was the “blemish” on the company’s results. 

CRG, once tied to David Jones, has had to be painstakingly untangled from its former sibling. Its turnover decreased from R14,074-million in 2024 to R12,439-million — a decline of more than 10%. 

Gross profit margins for CRG dropped 3.9 percentage points under pressure from discounting and a weaker Australian dollar, while a R917-million non-cash impairment was slapped on underperforming brands like Witchery, Mimco and Politix.

Read more: Woolworths trims dividend as Australasian operation weighs on results

“It’s been through a pretty rough time, but what we’ve done is transformed the operating model and set that business up as a fully standalone business. We’ve changed the structural economics and we’ve got some new leadership in place. All of that plays into a significantly improved performance going forward,” Bagattini said.

He said the “heavy lifting” of 2024 and 2025 will allow the division to return to profitability this financial year.

The company’s official outlook was cautious. “Notwithstanding easing inflation and recent interest rate cuts, business and consumer confidence across both geographies remains subdued, with discretionary spend likely to remain constrained for the foreseeable future. Global uncertainty regarding the potential impact of higher US tariffs presents a further headwind to the macro-economic outlook,” Woolworths said in its SENS results statement. 

For now, Woolies is carried by gourmet glory and pampered pets at home. Until Country Road finds its way, the group will remain caught between the ham and a hard place. DM