Woolworths, the South African retailer, has planned to spend US $ 538 million (10 billion rand) in capital expenditure over the next three years as it seeks to strengthen margins.
With operations in South Africa, Australia and New Zealand, Woolworths is a high-end retailer of apparel and groceries.
Zaid Manjra, Head of Finance of the company told analysts that the capex will be aimed at capacity enhancement and improved customer experience.
“Market share is not our primary focus in the fashion, beauty and home business,” said CEO Roy Bagattini. The company’s priority is “not just share of revenue, but share of profits”.
Woolworths spent one billion rand more in the 12 months ended 25thJune than it did in the previous year, and plans to spend an additional 700 million rand in the current financial year.
The roll out of the capital should see operating profit margin in the fashion, beauty and home segment reach more than 14 per cent and more than 7 per cent in food by the end of financial year 2026, the company said in a presentation.
Its high-end apparel arm Country Road Group’s operating profit margin is expected to be more than 12 per cent on the back of the capex investment over the same period.
As per media reports, Woolworths’ bigger rival Shoprite has been rapidly grabbing market share with aggressive promotions across all income levels, forcing Woolworths to find innovative ways to improve margins. Shoprite has performed better than South Africa’s benchmark index to date this year.
