Woolworths Holdings FY2026 Earnings Call - CEO Announces Strategic Pivot to Food-Led Ecosystem Amid FBH Struggles

Sam Makwambeni, Group CEO, Woolworths Holdings Limited: Good morning, and welcome to our 2026 annual results presentation. Today marks my first results presentation as Group CEO, and I am pleased to have the opportunity to engage with you and share my perspectives both on the year that has passed and the years ahead. As is customary, we will begin with a high-level overview of our performance over the past 12 months, after which I will hand over to our Group Financial Director, Zaid Manjra, who will take you through the detailed financial results. I will then share where I believe we can take the group, the decisions we have already taken, the choices we need to make, and the opportunities we have to shift our value creation potential before opening up for questions. Starting with the year in review. Financial year 2026 was a tough year.

There were a number of challenges across both regions, which we, like many retailers, are now accustomed to. Pressure on living costs, greater competition for the discretionary wallet, and intense promotional and competitive activity, all of which weighs on retail spend. Over the past few years, though, we have made good progress in a number of key areas to strengthen our foundational capabilities, and that has stood us in good stead. We saw encouraging momentum in our first half and entered the second half confident that we would keep building on that momentum to deliver a good earnings performance for the full year. What was unforeseen was the onset of the Middle East conflict, which unfortunately further weakened consumer sentiment and demand, particularly in the discretionary space. It also added close to ZAR 40 million to our cost base through higher fuel prices, in addition to various indirect impacts.

In South Africa, adverse weather conditions and security concerns in our stores created additional disruption, and these factors affected trade in the second half, particularly in the final quarter. Against this backdrop, group sales increased by approximately 5% for the year, being stronger growth in half one, but slower growth of 3.4% in the second half. Adjusted EBIT grew by just under 3% for the full year and ADHEPS up almost 4%. While it is not the worst outcome given the macro context, we know it is not nearly good enough in the context of our current earnings base and the extent to which we have been investing in our various businesses for the past several years. From a divisional perspective, our Foods business remains the star performer.

It continued to gain profitable market share, supported by the strength of its quality and innovation credentials, newer revenue streams, and the disciplined execution one has come to expect of this business. We have grown EBITDA ahead of turnover, despite higher distribution costs, and importantly, our return on capital remains industry leading, even as we continue to invest in future growth. In Fashion, Beauty, and Home, trading momentum slowed materially into the back end of the financial year. GP margin pressure compounded the softer sales performance, resulting in an outcome that fell short of plan. That said, there were some clear positives. Home delivered double-digit growth, and Beauty continued to strengthen its position as a leading destination in the category. Unfortunately, these gains were not enough to offset the underperformance of Fashion, and FBH’s overall result was disappointing.

That said, I’m very clear on what’s working in that business and what’s not, and more importantly, what we have started doing and still need to do about it. We will come back to that a bit later. Our financial services business, WFS, continues to perform well, delivering a strong underlying result and reflecting our continued focus on disciplined quality growth. Turning to Australia, it’s pleasing to see Country Road Group return to full year profitability. It’s not the level of profit we were expecting to deliver pre the onset of the war, but if we isolate that, the scoreboard is definitely moving in the right direction, benefiting from our repositioned brands, disciplined inventory management, and reset operating model. Importantly, the group’s cash earnings improved throughout the year, supported by the release of working capital with our apparel inventory down 15% on last year.

That not only drove a stronger free cash flow outcome but means we enter the new financial year in better shape. Not the worst result under the circumstances. Moving in the right direction, but not good enough, and some of that is on us. I’m clear on what will drive future performance, on what we must do and what must change, and we are acting decisively to do just that. Before sharing more on this with you, I’m going to hand over to Zaid to take you through our financial results in more detail.

Zaid Manjra, Group Financial Director, Woolworths Holdings Limited: Thank you, Sam. Hello, everyone, and thank you for joining us today. I will take you through the financial performance for FY 2026, highlight the key metrics, and provide an update on how we’ve traded in the first seven weeks of FY 2027. Before we get into the detail, let me start with the key group financial outcomes for the year, which Sam briefly spoke about in his overview. When we reported our interim results in February, momentum across the group was encouraging. Every business was growing sales and earnings, and all our businesses were gaining market share. That changed quite quickly when the conflict in the Middle East escalated. Almost immediately, we saw growth slowing down, particularly in discretionary categories as fuel prices escalated and inflationary pressure returned. Even against that backdrop, group sales for the full year grew 4.8% in constant currency to ZAR 84.5 billion.

In the second half, sales growth moderated to 3.4%. Adjusted EBITDA increased 3.1% in constant currency to ZAR 8.9 billion, while adjusted EBIT of ZAR 5.3 billion was 3.2% higher on the same basis. The second half EBIT growth of 3.1% was ahead of the first half growth of 2.5%. From an earnings perspective, growth was impacted by the loss of over ZAR 100 million of rental income from the Berg Street property, which was sold in the first half of last year. With lower finance costs and fewer shares in issue following our share buybacks, ADHEPS of ZAR 3.15 per share increased by a higher level of 4.6% in constant currency. We are declaring a total dividend of ZAR 1.99 per share for the year, which is 5.9% up on last year and is enhanced by the share buybacks. The final dividend is ZAR 0.81 per share.

Our dividends continue to be based on a 70% payout ratio of headline earnings. We were very deliberate in our focus on cash flow and are delighted to have generated free cash flow of ZAR 4 billion. This was supported by reducing our inventory levels, which in turn improved our working capital position by ZAR 462 million. Together with our strong cash conversion of 105%, this enabled us to maintain a healthy balance sheet. Our group balance sheet has net borrowings of ZAR 5.9 billion, with net debt to EBITDA at 1.44 times, including lease liabilities, which is well within our internal limit and bank covenants. While the heavy investment phase of the last few years has impacted our return metrics, our return on capital employed of 17% has improved by 60 basis points and widened the positive gap to cost of capital from 4% to 5.8%.

Woolworths South Africa’s return on capital employed is even stronger at 24.4%. Looking at our segmental earnings for the year, EBIT for Woolworths South Africa, which comprises the Food, FBH, and Financial Services businesses, was down 1.8% on last year, due largely to the FBH result, whereas EBITDA increased by 2.2%. Food delivered positive growth. EBIT of ZAR 3.7 billion was up by 3.2% for the year and by 2.9% in the second half. EBITDA grew by 6.1% for the year. FBH was our most challenging result this year. EBIT declined by 14% to ZAR 1.4 billion, with the second half particularly weak, down almost 28% as consumer demand softened significantly. We had a solid result from our Financial Services business in a very challenging credit environment. The underlying profit after tax increased by 5.6% in line with the book growth.

We were pleased with the Country Road Group returning to profitability, even though the result was below our own expectations. The EBIT of AUD 2.3 million was an improvement of AUD 20 million on the prior year’s loss. While our overall WHL profit growth was positive, it was negatively impacted by the unforeseen strength of the rand, particularly in the first half, and the incremental fuel costs incurred in the second half. Adjusting for both, EBIT growth would have been up by 4%. At this point, I would like to make a reference to the adjustments in the results. We have asset impairments of ZAR 178 million in South Africa and Australia relating to certain underperforming stores, goodwill impairment relating to a country in the rest of Africa, and certain software and PP&E assets as adjustments in headline earnings.

Further one-off adjustments to headline earnings of ZAR 421 million to get to adjusted headline earnings includes transaction and restructuring costs of ZAR 247 million and value chain transformation related costs of ZAR 166 million. I will now cover Woolworths South Africa, providing some macro context before taking you through each of the business units, thereafter, looking at the Australian environment and the performance of the Country Road Group. Most of you are pretty familiar with the South African macro context, so I won’t dwell on it here. The key point is that consumer indicators were improving throughout the first half before weakening sharply in the final quarter. Turning to our sales performance, Woolworths South Africa sales increased by 5.4% for the year, moderated by the second half growth of 4.1%, with a significant slowdown in quarter 4. This is consistent with the overall sector impacted by the macros we described earlier.

Our food business continued to deliver above-market sales growth of 5.7% and 3.7% on a comparable store basis. This was supported by the quality and innovation of our product offering and the ongoing focus on an elevated in-store customer experience. Sales growth softened to 4.4% in the second half as a result of slower growth in select produce and grocery categories, which was also impacted by disruptions to trade, including two security incidents we experienced in quarter four. Internal price inflation averaged 4.7% and was 3.9% excluding meat, a key category in our predominantly fresh offering. Our revenue through the Woolworths on-demand service grew by almost 20%, with the online channel now contributing 7.3% to sales through a wider offering, including from our dark stores and from after-dark service from Engen stores. In fashion, beauty, and home, sales increased by 4.4% and by 4% on a comparable store basis.

While trading momentum accelerated in the first half, the war in the Middle East had a material impact on discretionary spend in particular, resulting in the second half of sales growth slowing considerably to 2.6%. Price movement averaged 2.4% over the period, with fashion inflation at 0.9%, implying positive unit growth. As we continue to rationalize trading space, trading densities have improved by over 5%. Our homeware business delivered strong growth of 11.7%, supported by an enhanced homeware offering. Beauty continues to entrench itself as a leading destination and grew sales by 7.9%, despite increased competition in this category. Turning now to the segmental results, I will focus on the highlights of each business. There’s further detail in the appendix to the presentation pack as we normally do. Food delivered a good result with profitable market share gains.

We maintained gross margin in line with last year through operational efficiencies, which offset the impact of higher fuel prices, the Midrand DC expansion, and an increased online contribution. Expense growth of 6.5% includes store costs, which incorporates food services, our new generation stores, and Absolute Pets, all of which have contributed to both the top line and expense growth. Adjusted EBIT of ZAR 3.7 billion grew by 3.2%, delivering an EBIT margin of 6.7%. EBITDA growth of 6.1% was pleasingly ahead of both sales growth and EBIT growth. The food return on capital remains sector-leading at 37%, despite the significant long-term capital investments over the past few years. In fashion, beauty, and home, the second half trade performance was particularly disappointing. In addition to slowing sales growth, the GP margin reduced by 1.3 percentage points to 46%.

This was due mainly to our price investment in kids and babywear, the clearance of excess inventory following the weaker sales performance in quarter four, the dilutive margin effect of growing branded beauty business, and additional fuel costs. This more than offset the lower storage costs as our inventory levels reduced. Expense growth of 5.9% includes ZAR 49 million of Forex losses incurred during the year. As a result of the negative operational leverage, EBIT of ZAR 1.4 billion was 14% down on last year with an EBIT margin of 8.6%, which is well below our expectation. EBITDA declined by a lesser 5.5% to ZAR 2.4 billion, and return on capital for FBH reduced to 13.1%, although this remains above the cost of capital. Woolworths Financial Services delivered a solid performance despite the consumer affordability pressures and an increasingly dynamic credit risk landscape.

The closing book of ZAR 15.8 billion was 5.6% higher than last year, while net interest income of ZAR 1.9 billion was marginally ahead of last year. We remained disciplined in ensuring the quality of book growth. However, the deteriorating macroeconomic environment in H2 resulted in a higher impairment rate. While this increased by 0.9 percentage points to 7% for the year, it remains sector-leading. Strong growth in non-interest income of 17% enabled a 5.6% increase in our share of profit after tax to ZAR 228 million and a return on equity of 18.7%. Turning now to Australia and the Country Road Group. While the apparel retail sector in Australia began to stabilize in the first half, stubbornly high inflation and rising interest rates in H2 and the ensuing Middle East war impeded further recovery.

As consumer sentiment, footfall, and spend remained under significant pressure, the intense promotional activity continued as retailers sought to reduce inventory levels. The overall sales growth for the year was 1% up on the prior year, with H2 being 0.5% down. Comp growth, however, was up 1.6% as a result of rationalization of space. Despite the competitive environment, there was an improvement in the quality of sales, with higher full price sales and reduced discounting. The Country Road brand itself traded marginally ahead of last year, while Witchery and POLITIX were well up on the prior period, benefiting from the repositioning of their respective brands. Country Road Group has pleasingly returned to profitability as a result of an improved second half performance, albeit below our expectations.

CRG’s gross profit margin increased by 1.3 percentage points to 57.7% and achieved a 14% reduction in inventory through disciplined management of stock flow and clearance. The improved gross profit margins, coupled with a reduced cost of doing business from our reset operating model, resulted in EBIT of AUD 2.3 million, a AUD 20 million improvement from last year. This consequently also reflected in an improving EBIT margin and return on capital. Let’s now have a look at our capital expenditure balance sheet and cash flow. As many of our major multi-year strategic projects approach completion, our capital spend is beginning to normalize. Our spend now is increasingly on customer facing investments, including new generation store formats and in digital and technology, particularly on our online offering and experience. We continue to spend on maintaining our stores and asset base to ensure they meet our high standards of customer experience.

We spent ZAR 2.4 billion for the year, about 20% less than we spent last year, and pulled back on non-critical planned spend as trade slowed in the second half. Our CapEx for FY 2027 is planned at ZAR 2.2 billion across the group as last projects are planned to be completed, and note that this excludes any potential CapEx from the in2food acquisition, which is awaiting approval. Our balance sheet remains healthy with net group borrowings of ZAR 5.9 billion, which remains well within our internal limit. Gearing metrics, including net debt to EBITDA, also remain well within our target range and covenants. During the year, we repatriated $105 million from Australia to South Africa, part of which we used to buy back shares. Our focus on managing working capital resulted in reduced inventory levels by almost 9% with apparel inventory 15% lower.

Return on capital for the year of 17% improved by 60 basis points from last year and remains well ahead of the cost of capital, which has also since reduced. The WHL Group returns are adversely impacted by the returns of the Country Road Group and the long-term investments made over the past few years, including the Midrand DC and value chain transformation. The Absolute Pets acquisition continues to deliver returns well above the cost of capital. Moving on to our cash flow, we generated ZAR 9.3 billion of cash from operating activities for the year and free cash flow of ZAR 4 billion. A highlight of the year for me was the release of ZAR 462 million from working capital derived from lower levels of inventory at year-end.

We mentioned earlier we spent ZAR 500 million on share buybacks and cumulatively over the past four years have bought back shares to the value of ZAR 4.3 billion. In addition to this, we also repurchased shares for our employee share schemes, on which we spent ZAR 530 million during this year. We also paid ZAR 1.8 billion of dividends to our shareholders out of operating cash flows in the year. Importantly, we have a very cash generative business with a healthy cash conversion rate of 105% and a free cash flow per share of ZAR 4.50 per share, which is significantly up on last year. Before I hand back to Sam, let me briefly update you on trading in the first seven weeks of FY 2027.

Food sales have increased by 3.2% in the first seven weeks on a price movement of 3.1%, while for the first half, we expect price movement to be between 3.5% and 4.5%. Space growth for the full year is planned at between 2.5% and 3.5%. Fashion, beauty, and home sales are up 1.7% for the first seven weeks, although this is heavily influenced by the end of season sale. This was on a price movement of -0.3% for FBH and -1.7% for fashion. The price movement for H1 is expected to be between 4% and 5%, while net space is planned to be in line with last year. At Country Road Group, sales was down 7.7%, but as we have seen last year, with less clearance inventory, the quality of sales continues to improve. The near term trading conditions are expected to remain challenging.

However, we have initiatives underway to mitigate trade risks and maximize opportunities. In closing, I would like to advise that the group’s proposed acquisition of in2food remains subject to the fulfillment of the customary suspensive conditions. We await approval from the competition authorities, and once concluded, the transaction will be funded with a combination of cash and financing facilities and will be incorporated into the group as part of our food business. Thank you again for joining us today. I now hand you back to Sam for the strategy update.

Sam Makwambeni, Group CEO, Woolworths Holdings Limited: Thank you, Zaid. Typically, at this point in our annual results presentation, we take you through our strategies and the progress we have made against our various priorities. Today, I would like to take a slightly different approach. As I step into the role of Group CEO, I want to share my perspectives on the group, where I believe we have distinct strengths, where we need to dial up or dial back our focus, and where we need to shift so as to improve our ability to generate more predictable, more sustainable, higher quality earnings, and improve the return on capital. I have had the privilege of being part of Woolworths for more than 30 years across multiple areas of this business. That experience has given me a deep understanding of the group, our opportunities, as much as our challenges, from both a strategic as well as an operational perspective.

I don’t believe our challenges lie in the strategic direction of our underlying businesses. Yes, there is some work to do to validate and where necessary, refresh elements of our strategies. Directionally, they are broadly sound. Our challenge lies more in how and where we focus our time, our energy, and resources across the portfolio. While each of our businesses has a role to play in the broader portfolio, not all create value equally, nor do they offer the same potential when it comes to generating profit, generating cash, and generating returns. The makeup of our portfolio should reflect that, but it doesn’t, at least not yet.

Over the past few years, we’ve certainly made good progress in enhancing our allocation of capital and optimizing our construct, deliberately sifting capital out of Australia through the sale of David Jones and its associated properties and returning that capital to South Africa, where we generate far superior returns. But there are still areas within our group, even within our core South African business, which receives disproportionate capital and management attention relative to the role they play in the broader mix. That presents both opportunity and opportunity cost. We need to optimize our ability to deliver superior shareholder returns. That means allocating capital and resources top-down to the highest return opportunities across categories, channels, and geographies. In other words, where it will have the greatest impact for our customers, for our shareholders, and for the group.

This starts with a clear understanding of the role each component part plays within the customer journey and within the portfolio, and appreciating that that may look different looking ahead from what has been the case to date. For too long, our various businesses have operated in a somewhat siloed manner, each pursuing their own target market through a somewhat independent ambition and strategy. This leads to inconsistencies in how we show up to the customer, even inconsistencies in how we execute. Having worked across many areas of our organization, and most recently having led our extraordinary foods business, I am clear that our underlying strategies and how we execute need to give effect to a single overarching customer-centered and brand-led ambition, and that needs to be anchored in our premium food business. Food is our heartland. It’s our greatest competitive advantage, our greatest differentiator.

It’s where brand equity is strongest, reflecting the core attributes of who we are and what we stand for. Quality, innovation, sustainability, and customer centricity. It’s the primary engine of value creation for WHL, delivering consistently strong and profitable market share growth, leading operating metrics, phenomenal cash flows, and unrivaled return. Even against the headwinds of elevated fuel prices and the Midrand DC investment, Foods maintained its GP margin year-on-year through operational efficiency and disciplined execution. This is the kind of resilience that underpins the strategic shift I will outline shortly. It’s the business with the clearest right to win and the strongest opportunity to deliver sustainable growth and value creation over time. A stronger Foods proposition benefits all of Woolies. It drives frequency, footfall, loyalty, and spend.

It brings customers into our ecosystem more often and creates more opportunities for them to engage across categories and channels and drives basket economics, increase lifetime value of customer, and improves the economics of the group as a whole. Please hear me when I say this isn’t about diminishing the role of our other businesses. It is about being clear on how the portfolio works together to create value for the customer and for the shareholder. That means a unified view of the Woolies customer and a unified Woolies brand fulfilling more customer needs with a consistent expression and execution of the power of that brand. It’s about recognizing that our other component parts, our selected adjacencies, play a key role in complementing our Foods business and driving basket economics. But they don’t propel the business.

It is food that propels the broader ecosystem, and we need to be more deliberate, more disciplined in how we translate that brand equity into value by reorientating our business around food strategically, commercially and operationally. What shifts are we already making? The first shift is about prioritizing the growth and renewal opportunities within the food ecosystem itself, with the objective of increasing share of wallet and maximizing profit, not necessarily in percentage terms, but certainly in nominal terms, growing a bigger business in ZAR terms. There are a few components to the shifts. Firstly, it’s about sticking to our knitting in our core food retail business, ensuring we remain the destination for quality, innovation, sustainability and trusted value. Secondly, it means expanding food services as a key adjacency to the core.

Currently, we have just over 230 W. Café and coffee sites, but three times the number of food locations, which explains why less than 20% of our food shoppers shop our food service offering. So a lot of runway to expand our W. Café and coffee businesses, not just in terms of footprint, but as a driver of customer acquisition, frequency, engagement, and incremental growth. Thirdly, it’s about leveraging strategic partnerships. Our partnership with Uber Eats, for example, gives us access to an established customer base and delivery network into which we can extend our convenience proposition, driving incremental revenue without replicating any delivery infrastructure ourselves. This has been well received by our customers with our Woolies After Dark channel now available from 80 sites and more than doubling revenue on year-on-year. We are now also using the platform to provide convenient access to our strategic adjacencies such as W.

WCellar, Absolute Pets and W. Café, extending our reach and capturing incremental customer missions and spend. Engen is another example where we currently have just over 100 Engen forecourts with the aim to double our footprint in the medium term. Our recently announced intended acquisition of in2food has significant strategic bearing. It is not a departure from our partnership-based supply model that remains firmly intact, but it does demonstrate the benefit of highly selective acquisitions which brings strategic capability closer to the group. It enables us not only to strengthen our existing moat, but grow a bigger food business while simultaneously improving the value proposition to our customer. From a channel perspective, we need to make Woolworths even more inspirational, more convenient and more accessible for our customers. We will continue to roll out our best-in-class store of the future formats, with the latest one opening in Dainfern just last week.

Critically, we are also fundamentally rethinking the role of our online business, both strategically and commercially. To be candid, and many of you would be aware of this, the focus we have had on EBIT margin targets has inadvertently constrained both investment and growth in this channel. We have disappointed our online customer. She expects more from us. Our app, which was built on legacy architecture, does not deliver the seamless, frictionless proposition she deserves. While we know online is dilutive in margin percentage terms, it is accretive in ZAR. Our customer insights show that when a single channel customer converts to an omnichannel shopper, they spend significantly more with us. While some of the spend now takes place through a lower margin channel, we still realize an uplift in ZAR profit. So why are not we chasing it harder? That is changing.

As part of the strategic review underway, we have already rethought the role our online business needs to play, particularly within food. That means resetting, accelerating, and transforming our proposition so that it is easier, more convenient, and more relevant for our customers. This will reinforce the broader Woolworths flywheel and drive more EBIT ZAR for shareholders. This covers our first major shift, upweighting our focus on the growth and renewal opportunities within our foods ecosystem, our strongest driver of value creation. The second shift is about the relative role of fashion, beauty, and home. Beauty and home play a particularly important role in extending the food relationship into a broader lifestyle proposition. These growth pockets are identifiable and scaling, and they are categories where brand equity translate into commercial momentum. There is a lot more we can do, particularly in Home, which holds a natural cross-shop affinity with our Foods customer.

We are also expanding product ranges and will now be expanding footprint in existing stores, converting unproductive fashion square meters into highly productive home ones, better satisfying the customer mission and improving basket economics. From a fashion perspective, we have significantly reduced our inventory position, deliberately addressing the excess that drove the clearance margin pressure in the second half. Fashion enters the new financial year with a materially cleaner base from which to rebuild margin and redefine its role within the portfolio. Third, you will have seen that we are evolving our operating model to improve our ability to execute and fundamentally lower our cost of doing business. While our strategies have been directionally sound, where we have tended to fall short is in our execution.

We have, over the past many, many years, become a very complex and expensive business to run, with multiple layers of decision-making and invariably a lack of ownership and accountability. Over the past two months, we have made some key changes to the composition of the ExCo, ensuring that our leadership is configured around execution and operational performance. Further changes have also been implemented at the next level down to simplify our structures, to realign portfolios, reduce duplication, enable faster decision-making, and strengthen accountability at the point of value creation. It also takes cost out. Our fourth shift is about fundamentally strengthening our approach to capital allocation, bringing greater top-down prioritization, strategic discipline, and capability to where and how we invest.

Capital will be directed towards the opportunities that protect and grow our core business and associated adjacencies, strengthen our brand, enhance operational capability, and deliver sustainable long-term shareholder value. This means taking a more holistic view of the group’s investment choices, weighing opportunities not only on their individual merit, but also on their strategic importance and ability to strengthen the broader ecosystem. We will be more deliberate about the returns we expect from our investments, more rigorous in prioritizing competing demands for capital, and more willing to redirect capital where the returns do not justify continued investment. Ultimately, this is about making fewer but better choices with our capital investing behind the areas where we have the greatest right to win, the greatest potential to create value while maintaining the financial flexibility to respond to new opportunities as they arise.

At the same time, we are undertaking a strategic review of all underperforming or suboptimal businesses, geographies, and portfolio components. Our fifth key shift is to ensure that every part of the portfolio has a clear strategic role, a credible path to improved returns, and the appropriate level of investment to realize its potential. This includes our apparel proposition, both in SA and Australia, and being more deliberate about where we choose to compete and how we differentiate ourselves. I’ve mentioned already that CRG is undoubtedly moving in the right direction along its pathway to recovery, but there’s still more we can do. Whether it’s around the de-risking of the income statement to a low GDP growth environment or driving greater cross-shop in South Africa with our core foods customer. Where performance can be improved, we will act decisively. Where structural change is required, we will address it.

Where capital can generate better returns elsewhere, we will be prepared to make different and sometimes difficult choices. This is a moment of reset. We are reorientating the group around our market-leading premium food business, our strongest competitive advantage, and primary engine of value creation. Food at the very center of our portfolio with carefully selected adjacent categories, strengthening the customer proposition and our own ecosystem. In essence, a food-led flywheel driving greater customer engagement, footfall, loyalty, basket expansion, and ecosystem economics. A reset of this nature takes time. It’s not easy, and it’s not without execution risk. But it is a necessary risk if we are to achieve our objective. I know that we must act with resolve in implementing these shifts.

I don’t have all the answers for you now, but I’m very clear in our objective that we need to optimize the group’s portfolio and improve our quality and consistency of earnings by addressing not just underlying performance of the component parts, but through a deliberate shift in its mix. Over the coming months, we’ll be working through these key shifts in more detail and what it means for our underlying strategies and various initiatives, and I look forward to sharing our progress with you next time we meet. With regards to our medium-term guidance, we recognize the importance of clear targets in the visibility they give analysts and investors and the accountability they create for us. The targets we set need to be appropriately ambitious, but they also need to be achievable.

They need to reflect the evolving economics of retailing, and they need to reflect the deliberate strategic shifts we are making within our portfolio. It’s therefore premature for me to comment on these now, but you can expect an update on these at our next set of results. Looking ahead, the near-term operating environment in South Africa as well as Australia is expected to remain challenging with continued pressure on consumer demand. Our future, however, lies in the decisions and actions we’ve already taken and the choices we now make to reset this group around its greatest source of value. We have a brilliant brand with a brilliant future. We have clarity on what will drive future performance, what must be done, what must change, and we have the conviction to act decisively.

Our priority now is to move from complexity to focus, from broad ambition to disciplined allocation, and from strategic intent to consistent execution. By doing so, we will convert the strength of our brand, our people, our capabilities, and our values into a more focused, higher quality earning space, a strong return profile, and sustainable long-term value creation. My commitment is to focus the organization on what matters most and allocate capital and resources with discipline. To lead with purpose, courage, care, and accountability as we build a stronger WHL and a more valuable group to the benefit of all our stakeholders. Before we open for questions, I’d like to take a moment to thank our teams who make our business what it is. To our people, thank you for your commitment. Thank you for your energy and the pride you bring to Woolies every day.

You are what makes this business so special. To our suppliers and partners, thank you for your expertise and collaboration that help us deliver the quality and innovation our customers expect from us. To our customers, thank you for choosing Woolies. Thank you for your loyalty and for the trust you place in us. It is truly a privilege to lead a brand that has earned such a strong place in the hearts and minds of its customers. With that, we’ll now open for questions.

Jeanine Womersley, Moderator/Analyst: Good morning. I’m Jeanine Womersley, and welcome again to our 2026 results presentation. Moving straight into Q&A, our first question. Sam, you seem to have come out of the starting blocks quite quickly. Could you perhaps share a bit more detail on some of the changes you’ve made internally to give effect to this reorientation you’ve spoken about?

Sam Makwambeni, Group CEO, Woolworths Holdings Limited: Thanks, Jeanine. Yes, I’ve been applying my mind to this shift for a long time, and wanted to make sure that when we start the new financial year, that we have the right both structure and team in place that I think that will best execute to that. So when thinking through the structure, it was about simplification, it was about sharpening execution. In the execution space, it was about bringing capabilities of functions together that fall in love with operations again, fall in love with selling stuff to customers, and sharpen and work towards world-class KPIs. So needed to create the structure that can facilitate that. Likewise, we needed to invest in capabilities where we think we’re lagging the market and creating a digital officer role is a reflection of that. Removing the inertia in the business, creating clear accountability of where I think it should operate from.

It also gave us opportunity to take cost out. We’ve not only reset the top layer of the organization, we’ve also reset the layer of the reporting into the ExCo specifically. When I announced our structure to our leadership team, there’s been some feedback, and let’s be clear on that the top structure doesn’t have a nice mix or a perfect mix, and I wanted to see more females in that. When we went after the ExCo minus one structure or the structure below ExCo, we are delighted to announce the fact that we actually appointed six Black females into some of those opportunities that we created in that space. So a sharper focus on execution and investment in future capabilities, and an ability, I think, for the team to align on the reset that we’re going to speak about later on in the presentation.

Jeanine Womersley, Moderator/Analyst: Thanks, Sam. We have a couple questions on CRG. Can you please provide some insight into the strategy for CRG? Is the business core? Is the strategy to exit CRG? Again, another similar question, does management view CRG as core? Given its drag to group return metrics, does it not make sense to exit and refocus on South Africa?

Sam Makwambeni, Group CEO, Woolworths Holdings Limited: I think I am probably going to start off with my last shift that I talked about earlier on. That is, we are going to do a piece of work to understand the underlying parts of the portfolio, every bit of it, whether it is fashion, beauty, home, financial services, Country Road. We are undertaking that work at the moment, and we will come back to that in due course. I think the immediate focus is the fact that this team has been able to pull us into profitable territory. That to me is a very significant step forward. We spoke about the fact that they improved margin, they focused heavily on cost, and there is a huge opportunity to reset the brand ambition we have for the Country Road product per se.

Our focus in that business in the medium term or the foreseeable future is all about enhancing or staying on that trajectory. Better profit performance. Until we get that under our belt, we are pretty comfortable that the current construct will hold, and that the focus will continue to drive bottom-line performance.

Jeanine Womersley, Moderator/Analyst: Thanks, Sam. Sticking with CRG, but Zaid perhaps for you, two somewhat similar questions. You say CRG is in a better position, but it looks like revenue growth is collapsing into the new year. What is going on? Please comment on like-for-like sales for Country Road in the first 7 weeks of FY 2027. Does the 7.7% decline in sales reflect the projected 6% closure in space? Thank you.

Zaid Manjra, Group Financial Director, Woolworths Holdings Limited: Thank you for the question. Indeed, as you would have seen, the Country Road sales numbers, for the first 7 weeks have been down by just over 7%. But as I explained during the presentation, if you look at the Country Road level of inventory that we have gone into the new financial year, we have reduced levels of inventory by almost 15%, and the quality of the inventory going into the new financial year has been a lot better. Therefore, the first few weeks of July generally tends to be clearance weeks. Of course, we have had a much smaller clearance compared to what we had in the prior period. Therefore, that is what you have seen reflected therefore in the sales versus last year.

The quality of the sales in terms of the full price sales versus markdown is a lot better, and therefore, one would expect the margins to be a lot better. On the question of the reduction in space, the guidance we’ve given regarding the reduction in space is yet to come. It will happen during the course of the year. It hasn’t happened in the first 6, 7 weeks, so we will still execute on that. The like-for-like sales we haven’t disclosed, but it wouldn’t be very dissimilar to the sales number we’ve provided.

Jeanine Womersley, Moderator/Analyst: Thanks, Ed. Sam, do you have an update on the attacks on two of your stores? Any material concerns with the upcoming municipal elections or additional security measures being taken?

Sam Makwambeni, Group CEO, Woolworths Holdings Limited: Thanks for the question, Jeanine. I think a good reminder of what’s important, I guess. I think during this challenge we had last year, we were crystal clear that the priority was the safety of our staff and the safety of our customers, and we are pleased to stand this side of that process with no harm done to any of our employees or any of our staff. So we’re very happy that we’ve managed to achieve an outcome in that regard. So that’s the first point I want to make. It’s been an interesting process because we’ve had some fantastic help from both local and international experts. That was great. I must call out the fact that I think the local authorities were exceptional in their assistance through the process.

We had a good couple of leads that didn’t end up with anybody being arrested, but I’m very comfortable that it’s being thoroughly investigated. At this point, it’s still an open investigation, and we remain to be on full alert. I don’t think, though, that this issue has got any connection with the upcoming municipality elections whatsoever.

Jeanine Womersley, Moderator/Analyst: Thanks, Sam. How do you intend to manage food inflation in your quest for acquiring new customers?

Sam Makwambeni, Group CEO, Woolworths Holdings Limited: I think the first point is probably just to talk a little bit about why we have the food inflation that we have. Because just to be clear that our basket is different to the basket of our competitor set. We tend to skew more heavily to the value-added components and less to, if I could call it, commodity-based products. So there’s always that mix effect that’s important. Our price movement lags the market, and certainly, we can see some of that momentum coming through. I think over the period, the guys have become far sharper on how we effectively drive promotions. So its promotional activity was, I think, better executed over the period. However, I think we’ve learned certainly as we came out of peak trade last year, we went back into the organization and we’re making, in our business, innovation tougher.

What I mean by that is that it’s easy to innovate and come up with high-quality products. When you make it tough, you come up with a good quality product at the right value point, and I still think we have lots of work to do to improve that line of thinking. But on the other hand, we are executing on initiatives like our W List, excuse me, where we have about 250 SKUs that are commodity-like products. When we look at the inflation movements on those products, I think it’s in line with our peer group. But a lot more work to be done on the medium term to make sure that we improve our value quality equation.

Jeanine Womersley, Moderator/Analyst: Thanks, Sam. We have a question on in2food. Hi. What is the purchase price of in2food or further acquisitions of key suppliers planned?

Sam Makwambeni, Group CEO, Woolworths Holdings Limited: Thank you. If you don’t mind, thanks, Jeanine Womersley, but if you don’t mind, I’m not going to comment on the purchase price for in2food. I’d like to talk about the other point because it’s obviously very important to us. I think it’s a nice place in my mind just to remind us that I think we are the premium food retailer in this country. We make product, we don’t just buy product. A small percentage of what’s on our shelves are actually brands. Most of what we sell are products that we make. In making those products, our supplier base have been a key part of us giving effect to that, their innovation, their commitment.

During my time in the foods business, I’ve spent a lot of time having a braai up in Potchefstroom, or going to Cavalier and taste a new recipe, investing in those relationships because they are important to us. I think what’s important that I want to land here and in the broader construct is that formula is not changing at all. We will continue to embrace that, and we acknowledge the fact that it’s an important part of our formula, and we’ll do our best to make sure that we protect that at all cost. So, we don’t have any further plans. However, it is a key part of our success formula, and we will do what we need to do to make sure that we deliver the appropriate value relationship between ourselves and our supplier base.

Jeanine Womersley, Moderator/Analyst: Thanks, Sam. Still on foods, what drove the better gross margin in the food business in the second half of 2026, and is this sustainable?

Sam Makwambeni, Group CEO, Woolworths Holdings Limited: Yeah, I think the gross margin for last year, there are three things to call out in the food business in that context. One is we know that the online business plays a bigger role, but for last year, that team has done a very good job in making sure that the profitability of that business was good. So it was better than planned. So a huge appreciation for the team for delivering that specifically. I spoke about promotion optimization earlier, and again, that had a big effect on how we optimized our promotions and drive this outcome. And within the broader ecosystem or operational environment, the team chased down significant operational efficiency opportunities. So those three elements is what allowed us to sustain the margin over the previous year. Importantly, we’ve spoken to you about the investment in the DC.

We’ve spoken to you about the fact that, and I’ve spoken to you earlier about the fact that we’re going to be more aggressive in online. We just had yesterday the announcement that the diesel cost is going up again. All those points are still relevant. I think what we will do is try to mitigate that to the best of our ability, is probably the best way I can answer that question.

Jeanine Womersley, Moderator/Analyst: Thanks, Sam. Let us give you a break just for a few seconds. Zaid, a question for you. Can you comment on FBH’s inventory going into H1 2027?

Zaid Manjra, Group Financial Director, Woolworths Holdings Limited: As I’ve mentioned during the presentation, FBH’s level of inventory at the end of the financial year has been significantly better than what we had in the 12 months prior to that. We are 17% down year on year from an inventory position. Having said that, I still believe that the level of inventory we have in FBH is still higher than we would like. I think what we’ve gone into a period now where we’ve gone into winter clearance. I’m quite happy that we don’t have an excess of the seasonal product, which is the winter product going into markdown. I expect if you look at our stock turn ratios, for example, it is not where I would like it to be. I would expect that to improve as well.

I think while we’ve done a great job in reducing inventory levels in FY 2026, my expectation is that there’s still a way to go to reduce inventory further to a more optimal level relative to the size of our business.

Jeanine Womersley, Moderator/Analyst: Thanks, Zaid. Sam, a couple questions on food volumes. Firstly, hi, thanks for the presentation. Can you provide some color on the volume decline in food in H2? Is it possible that Woolworths is pushing too hard on price at a moment when peers are passing through deflation in key basket categories? Second similar theme, it looks like food volumes were negative in H2. What do you put that down to, and how do you reverse that?

Sam Makwambeni, Group CEO, Woolworths Holdings Limited: Yeah, thank you. So obviously a key part of what makes this engine work is the volume aspect of it. I think we’re clear that the volume price is concentrated in two areas, and I think we’ve communicated that in our SENS announcement. It is in bakery categories, so I’ll come back to that. Then it is in produce. Now, in produce, unlike what the rest of the market does, we have a closed group of suppliers we buy from. For the last period, we didn’t have the best weather. In that context, we struggled with volumes. Now, the real issue was not that we didn’t have the volume. We’ve made some deliberate decisions that even with the volume, we were uncomfortable with the quality, and therefore, the product didn’t make its way to the shelf.

If I think about that, I’ll make that same call again. We cannot put a product to a customer that’s of the wrong quality, and therefore, it was the right decision, and I’ll support the team in that context. We have made a lot of progress in produce, and in produce, my apologies. We have certainly worked with our suppliers to give us a more predictable, more secured outcome over the next while, so I think supply will be better. The team has brought on an additional group of suppliers to help mitigate that. So I think we know what the problem was. I think we know what we need to do going forward, and we’re executing on that. On the issue around bakery categories, it is back to the point I made previously.

It’s about being deliberate and being clear that innovation is now about better product in terms of quality and more value, and we need to invest in that. But broadly or broader than that, when we look at what we think of will drive value in the overall ecosystems, I talked to you earlier about the emphasis we want to put on food services. We think there’s opportunity there to drive volume. There is the relationships we have with our partners, whether that is Uber Eats to drive that, the relationship we have with Engen, doubling our food court presence, and our reset orientation on online. I think there’s huge opportunity to do that. Likewise, if I look back to the last year, I don’t think our loyalty migration worked as well as it could, and that I think cost us something.

A lot of stuff to work to improve that. I think as we drive these initiatives, we will claw the volume back. It is the right stuff to do. I think the teams are executing, and I am surely looking forward to reporting a positive SIF in due course.

Jeanine Womersley, Moderator/Analyst: Thanks, Sam. Zaid, freight costs have risen significantly. How will this affect the outlook for CRG GP margins?

Zaid Manjra, Group Financial Director, Woolworths Holdings Limited: Thanks, Janine. Yes, we have indicated the impact of the freight costs on the CRG business for the last financial year. Looking forward in terms of the outlook, what we have done in that business is we have contracted already with some of the freight companies a rate going forward. Having said that, I think where there is going to be a spike in freight costs, what tends to happen is you do get charged what they call a surcharge. While we think we are sufficiently covered for a period of time, if there is more a spike that is higher than I think one expects, as we might see, depending on the outcome of what goes on in the Middle East, there could be a further impact. As things stand, I think we are sufficiently covered.

Jeanine Womersley, Moderator/Analyst: Thanks, Zaid. Another question. Thanks for the presentation. Could you expand on how fast the FBH shifts from unproductive apparel to home ware likely to take? What are the actions or plan to make FBH a better business?

Sam Makwambeni, Group CEO, Woolworths Holdings Limited: Yeah. Listen, Jeanine Womersley, I think to answer the question, I would probably want to go back and sort of give my assessment to think of just to articulate where I think the FBH business is. I know we’ve communicated previously that we turned it around. I probably have a bit more of a nuanced perspective on that, and I would like to just briefly talk about that. I think we’ve made significant inroads in home, and we are a product-led business, and in that regard, the product in that area is significantly better than it was. And customers love it, and you’ll see that in our double-digit sales that we reported for the last quarter. So the home business has certainly made good progress. Beauty reported just over 7% growth. We think there’s more opportunity.

It’s certainly making good progress, but we think there’s opportunity to change the mix, specifically focusing on our private label beauty proposition. So in those two areas, I think we’ve made great progress. In that construct, we think there’s opportunity that we need to create more space for the home business, which I’ll come back to after I speak about the fashion business. My reflection on fashion is, if you go back to the reset that I’m talking about in terms of foods, part of that reset is for us to get clarity around the roles that the adjacencies play. With regards to fashion, if I look at what our brand stands for, and I look at how fashion is currently being expressed as a function of that brand, I think it seriously lags the quality credentials.

So my initial focus and important focus for that business is for it to certainly dial up its quality credentials, and in that concept, look at the tail of product that it sells. The reason why we need to do that is to make sure that we focus on where it makes the biggest difference, but on the other side, to certainly remove the long tail that’s unproductive. That’s where I think there’s a big opportunity for home to take additional space. We’ve got plans in place to do that, so we’re looking to go after that with urgency as we enter this financial year. So key priority for us to go there, but more work to be done in fashion.

But as I said, as one of my shifts, we will do a deep dive on all the adjacencies, all parts of the portfolio, to make sure that we understand what the right roadmap is to ensure future success.

Jeanine Womersley, Moderator/Analyst: Thanks, Sam. A quick question, which I am happy to answer. What percentage of sales is home and beauty of FBH? Just over 80% of FBH sales comes from the core fashion business, with the balance between home and beauty, slightly more skewed to beauty relative to home. Zaid, a question for you. Please, could you explain the value chain transformation costs that were added back? It seemed that these were a material contributor to earnings growth over the year.

Zaid Manjra, Group Financial Director, Woolworths Holdings Limited: Thanks for the question. Let me just first clarify that these are not costs that we added back. These were costs that have been previously incurred in prior years that have been capitalized. Now, post our review of some of those costs that have been capitalized, some of these costs have been written down, and therefore, been regarded as abnormal.

Jeanine Womersley, Moderator/Analyst: Thanks, Zaid. Sam, is Woolworths Dash being held back by capacity constraints and delivery? Some regions seem to lack same-day delivery options.

Sam Makwambeni, Group CEO, Woolworths Holdings Limited: I think the answer to this question, Jeanine Womersley, is a little bit unfortunately bigger than that. When I spoke about my shifts, I spoke about online as an opportunity to really have a hard reset. Let me just contextualize the real challenge we have in online. We know that the online channel is margin or EBIT percentage decretive, right? Over the years, being held to a certain margin target has created an interesting level of friction in the organization where call it the product area needs to protect the EBIT margin, while other areas of the business think we need to be more aggressive. I am removing that constraint. I am removing this conflict in the organization, and I am making it very clear that the value is about the omni channel.

We know that if she shops across channels, she’s more profitable, and therefore, we are going to free up, unconstrain the online channel. The reality is it’s going to be percentage decretive, but it is going to be accretive at two levels. One, we will bank more rents, we know that. Secondly, we will certainly grow more customers. The reality is that there are two elements here that we need to improve on. One is the actual experience on the app, and that’s a piece of work the team needs to stand up. It will take a little bit of a minute, I think, to get that done. In the meantime, the team is running very hard at removing some of the operational constraints. Like the question asked, same day delivery, how do we scale that and roll it out across the country?

What we’re focusing on the short term is to make sure that we remove some of the constraints around slots, around drivers, around pickers, and find a way to open dark stores where it matters. Hear me when I say this is a big opportunity. Actually, the EBIT target and the conflict in the organization was actually the biggest obstacle for us making the progress in the channel. That’s removed, and we’ll be more aggressive in making this happen going forward.

Jeanine Womersley, Moderator/Analyst: Thanks, Sam. Zaid, can you comment on the outlook for FBH’s GP margin? The winter clearance this year was larger than last year, which means the first seven weeks’ GP would have declined.

Zaid Manjra, Group Financial Director, Woolworths Holdings Limited: Thanks again for the question. There’s two parts to the question, the first being the outlook for FBH’s GP margin. I think what we saw in FY 2026 was the 46% GP margin, which was a combination of a number of things, I think, which we have called out before, one being the level of promotions and markdowns we’ve had to clear the level of inventory that we had set, particularly due to the sales that we had in the final quarter. We also have previously spoken to you about the price investment we’ve done in kids and baby wear. I think previously we’ve spoken about the supply chain cost that we’ve had. My view on the GP margin going forward is very similar to the guidance we’ve given before. It will be between 46% and 47%, largely driven by the work we are doing around price investment.

I think some of the costs that we have incurred previously in terms of the supply chain costs will also start coming back as the years progress. The second part of your question with regard to the first 7 weeks of trade, the size of the sale was slightly bigger than last year. However, I believe that based on the mechanism that we’ve gone through in terms of the markdown, it would be a more profitable sale than we’ve had previously. Therefore, I don’t expect the margin to be diluted significantly.

Jeanine Womersley, Moderator/Analyst: Thanks, Zaid. Maybe one or two last questions. Sam, are the new ventures now profitable, and when will they no longer dilute the food margin?

Sam Makwambeni, Group CEO, Woolworths Holdings Limited: Well, that’s an interesting one, Jeanine. Firstly, the concept of ventures was always a great concept because it was about incubating and getting the portfolio to a state that we could move it back into the core business. It certainly isn’t dilutive. If you think through Absolute Pets, which, by the way, still is a standalone business and doing phenomenally well with a very good EBIT percentage. Our wine category and WCellar, it’s always been accretive, so we just put that back into the Foods business because that makes sense that it get run from that area and considered in the overall shopping experience. More importantly, the only reason we didn’t move the food services component into the business is because I think there is still a lot of runway there. I think there’s huge opportunity.

I think in my earlier speech, I sort of talked about the number of W. Cafés we have versus the size of our network. I think there’s opportunity to be crystal clear around how big we think that business can be, and that’s the only reason we didn’t put that in. So no, it is accretive, it’s not dilutive, and we are very comfortable that the reason to keep food services out is because we want to be a little bit more aggressive in our rollout plan going forward.

Jeanine Womersley, Moderator/Analyst: Thanks, Sam. We will take one last question. Is the change in focus to food more a function of your recent time in the foods business versus the right strategic move for the group? Margins in clothing are typically higher, and significant investment has already been made towards improving both operational and financial metrics going forward.

Sam Makwambeni, Group CEO, Woolworths Holdings Limited: I think let’s start with the last part, and I will come back to the first part of the question. We are not turning our back on the fashion, home, and beauty business. If that’s an understanding that’s been created, let me fix that. Actually, we want to make sure that we understand the role that those adjacencies play, and to give them the right focus to grow into their full potential. I just want to mention that. I have been with the business for a long time. Whether that’s good or bad, I think time will tell. One of the things that I think I have been clearer or been clear is how we make money, right? It’s interesting that I was in foods for two years, but I am not going to sit here and declare myself a food expert, not for a long shot.

What I can tell you is that it did sharpen my conviction rather than that this is the right thing to do. Strategically, I think it is the right thing. My two years in foods sharpened my conviction, and that’s why I am so excited and upbeat about what is a risky reset, what is challenging, but I think it’s worthwhile chasing down. That certainly is the driver of how I got here or why we got here at the end. I don’t think I am the best foodie around. There are some good guys in the business doing that.

Jeanine Womersley, Moderator/Analyst: Sam, thank you. That brings our Q&A section of our results presentation to a close. We look forward to having the opportunity to engage with a number of you over the coming days and weeks. Thank you very much for joining us today.

Sam Makwambeni, Group CEO, Woolworths Holdings Limited: Thank you.

Zaid Manjra, Group Financial Director, Woolworths Holdings Limited: Thank you very much.

Sam Makwambeni, Group CEO, Woolworths Holdings Limited: Good to speak to you. Thank you.