A slump in gross profit at Country Road Group has added to an overall pullback in total gross profit across its parent company Woolworths Holdings Limited (South Africa).
For the 26 weeks to December 29 last year, the Australian fashion group’s gross profit dropped by 13.5 per cent compared to the same period in 2023, with its profit before tax down 93.6 per cent.
Country Road Group is the parent company to Country Road, Mimco, Trenery, Witchery and Politix.
WHL confirmed the news in a trading update this week, adding that the impact of softer-than-expected topline growth across its apparel businesses – including Woolworths department stores – coupled with pressure on gross profit margins and the increased operating expenditure on restructuring negatively impacted profitability during the period, “particularly in the case of CRG.”
According to WHL, the recent negative results for Country Road Group follow the parent company’s sales of David jones in 2023, which led to a separation of the fashion group from David Jones in 2024.
Country Road Group is now currently in the midst of a “significant restructure”, WHL reported, in order to reconfigure its operating model and reset its structural economics as a standalone business.
“This restructuring is being implemented in an accelerated timeframe,” WHL added. “In addition, as mentioned, the apparel trading environment in Australia and New Zealand remains significantly constrained, characterised by reduced footfall and spend, and intense promotional activity.”
The fashion group’s sales declined by 6.2 per cent for the period and by 7.8 per cent on a comparable-store basis. Trading space decreased by 2.4 per cent, while online sales contributed 27.1 per cent of total sales for the period, up from 26.8 per cent in the prior period.
“Higher promotional activity to manage inventory levels and the impact of a weaker Australian Dollar on input costs resulted in a 320 basis points decrease in the gross profit margin to 58.9 per cent,” WHL continued. “Whilst expenses were well controlled, decreasing by 1.3 per cent, the impact of a weaker topline and the business's temporarily higher cost base post the David Jones separation, resulted in significant negative operational leverage in the period.
“Adjusted operating profit of A$14.2 million decreased by 71.7 per cent, returning an operating profit margin of 2.6 per cent.”
As WHL looks to the rest of 2025, it highlighted that the recent positions taken by the United States around global trade relations have elevated the forecast risk regarding the macro-economic outlook, more so in South Africa.
This is despite signs of improving consumer confidence across both its key geographies.
In Australia, WHL expects the local retail sector to remain highly promotional until cost of living pressures ease.
“During the second half of the financial year, we will undertake a reassessment of the carrying value of the assets of our underperforming brands within the Country Road Group,” WHL reported. “This exercise will give due consideration to the macroeconomic environment, our strategic plans and our reset operating model.
“Notwithstanding the potential impact of external factors across both our geographies, we are confident in our ability to achieve our strategic objectives, and are well-positioned to benefit from any cyclical recovery in consumer spending.
“Any reference to future financial performance included in this announcement has not been reviewed or reported on by the group's external auditors and does not constitute an earnings forecast.”