Good morning, everyone, and welcome to our 2024 Annual Results Presentation. We'll start this morning with a high-level overview of our performance for the year, and I will then hand over to Group Finance Director, Zaid Manjra, who will take you through the details of our financial results for the period. I will then update you on how we're progressing against our various strategies, and share some thoughts regarding our outlook before opening up to questions. Starting with an overview of the year. The numbers we'll be focusing on relate to our continuing operations, because, as you'd recall, we sold David Jones earlier last year, an outcome which has been truly transformational for our group and our shareholders, and so the numbers we're talking to you today exclude that business from last year's base.
FY 2024 is also a 53-week year for us, but we'll focus mainly on the comparable 52-week performance. So turning to the actual results, this year has been a lot more challenging than we'd expected, largely by virtue of the macro backdrop, which steadily worsened throughout the year, and this was evident across both geographies, but particularly in Australia. You've heard me say before that we don't like attributing performance to macro factors, but one way or another, we cannot deny the broader environment has had a pronounced impact on our results for the period, given the significant pressure we've seen on the consumer.
Against this tough backdrop, group sales were up over 4% for the year. As you'd expect, we've continued to focus on the high-impact areas within our control, from inventory to GP margins, cost containment, to driving cash conversion, and of course, executing against our strategies.
But the tough trading environment was such that we've seen EBIT down 14% and ADHEPS down 12% off last year's record highs. While sales growth was respectable in the context of a very challenging environment, I want to make it clear that we're not happy with our bottom line results, and we'll take you through how much of that was specific to FY 2024 versus a function of the decisions we're making as a business. From a divisional perspective, our Foods business once again demonstrated its strength and resilience and the trust customers are placing in our Woolworths brand. It delivered an excellent result, and it has achieved the strongest organic growth in the sector, driven by new customers, more transactions, and increased basket values.
We've taken market share over the period, and we've expanded margins at both the GP and EBIT level, and this has happened notwithstanding our continued investment in price and other strategic initiatives. Our business also benefited in the last quarter from the acquisition of Absolute Pets, which has been both margin and earnings accretive for us, and we'll go into that in a little bit more detail later.
In Fashion, Beauty, and Home, we've continued to make really good progress on a number of our strategic and turnaround initiatives, but to be frank, sales growth was behind expectation. There were a number of factors beyond the ongoing pressure on discretionary spend, from the impact of shipping delays and port congestion to the late onset of winter, and I think also important to call out the significant impact that certain international online retailers are having on our South African market.
There have been a number of external headwinds impacting our performance, but to be candid, we also scored some own goals, specifically with regards to poor product availability in our fashion business, which is something I spoke about at our Interims, and I will address again later. Notwithstanding these challenges, we've continued to focus on strengthening the underlying financial health of our FBH business, which we'd committed to doing, and through this, we've achieved a further increase in the share of full price sales and a further significant improvement in the markdown percentage.
That has enabled us to maintain our improved GP margin year on year, despite the margin dilutive impact of a very strongly growing beauty business. Our joint venture financial services business, WFS, saw a very strong recovery in post-tax profits and continues to deliver the healthiest impairment ratio in the sector.
And so, in summary, when we look at our overall South Africa and African business, while FBH was softer than we would have liked, the rebound in WFS and the exceptional results from Food saw us grow total profits ahead of inflation, a pretty decent result in the current climate. Turning to Australia, the performance of the Country Road Group has, without question, been the most disappointing outcome for us this year. Trading conditions proved significantly tougher and more protracted than expected, with higher living costs, and in particular, higher interest rates having a pronounced impact on consumer confidence and spend, and resulting in a double-digit decline in footfall. That put a lot of pressure on comp sales, particularly relative to last year's all-time high base.
In addition, we had to contend with the cost synergies arising from separating CRG from David Jones, which worsened the negative operational leverage in the business, and that, in turn, significantly impacted CRG's performance for the period, and unfortunately, our group's bottom line, overall result. Obviously, this has been very disappointing for us, but we see it very much as a temporary setback and certainly not a reflection of our group's true potential. We have a very healthy balance sheet. We've improved our cash generation even further. We continue to generate very healthy returns, well above our cost of capital, notwithstanding the very significant investments we're making in our future growth.
And given the foundations we've been building over the past few years, our strong brands and our clear strategies, we're well-positioned to benefit not only from any improvement in the macro, but also from our self-help and multiple growth initiatives. And I look forward to updating you on that a bit later. But before handing over to Zaid, I'd like to touch on our Good Business Journey, which is firmly embedded within everything we do. As you are aware, our vision is to be one of the world's most responsible retailers. We are resolutely focused on doing the right thing and doing it in the right way, and we really do strive to put sustainability at the heart of how we operate and manage our business.
We've been investing in this journey for decades and continue to lead in this space, and what you'll see on the screen are just a few of our Good Business Journey highlights for the year. We've also been recognized again this year for numerous sustainability achievements, and while it's great to be the first in some of these and to have our efforts externally acknowledged, we're not doing this to win awards, but to play our role in positively and meaningfully impacting our environment, the lives of our employees and their families, and the customers and communities we serve. It really is integral to who we are, and it's partly because of this responsibility that I find the lack of regulatory oversight when it comes to certain international online discount retailers extremely disappointing.
The negative impact these businesses are having, not only on our environment, but also on local economies, and in particular, the livelihoods of people in communities already facing a multitude of challenges, is severe. As a responsible South African business, we will play our role engaging with government, and in line with our commitment to building a fully transparent, traceable, and ethical supply chain, we'll continue amplifying our own sustainability attributes and talk more loudly about this to help customers make better informed choices about where to shop, and that's something we'll share with you in more detail in our upcoming ESG Investor Day.
We're all aware that South Africa, in particular, continues to struggle with the impact of decades-long injustice and inequality. At Woolies, we believe that business has an important role to play in driving change and creating opportunities, especially for the youth of our country.
I'm really pleased with the ongoing progress we are making in respect of our Inclusive Justice Initiative, which is based on the premise of leaving no one behind and is underpinned by our commitment to fully embrace diversity and inclusivity. This year, we launched the Woolworths Youth Makers Competition, selecting 15 entrepreneurs from hundreds of entries, and the winners receiving a year's mentorship from our Woolies retail experts. We also provided funding to help them build their brands and the opportunity to market their products to Woolies customers in our stores. Through this exciting initiative, we're uplifting young entrepreneurs who are the future job creators of our time, a vital step towards building a more inclusive future for young South Africans. This is just one example of how our Good Business Journey makes a real difference.
On that note, let me hand over to Zaid to take you through the financial performance in more detail. Thank you, Zaid. Over to you.
Thank you, Roy. Welcome, and good day, everyone. Thank you for joining us. It's my pleasure to present our financial results for the 2024 financial year. Today, I will walk you through our performance, discuss key financial metrics, and provide some insights on our results. I will also give you a view of how we are positioned going forward. Some parts of our business performed exceptionally well, while others faced more challenges than we anticipated, but we will get into that pretty soon. It has been another eventful year in which we have achieved much, including the completion of the David Jones sale, which we spoke about at the interims. We also acquired the leading pet business in South Africa, Absolute Pets, and made good progress on many of our other strategic initiatives and investments, which we'll talk more about later.
At the outset, it's important to note that our statutory results are not comparable to last year. In the 2023 financial year, we had nine months of David Jones in our base, which we don't have this year. In addition, the 2024 financial year is a 53-week reporting period, compared to 52 weeks last year. In my presentation, I will reference the 52-week on 52-week performance, excluding David Jones, so that they are comparable. The balance sheet and cash flow will, however, reflect the full year to the end of the 53rd week, to the 30th of June, 2024. Let's start with a high-level overview of the group result. Our group turnover and concession sales of ZAR 76.4 billion was up 4.3% for the year, off an elevated prior year growth of 10.8%.
The slowdown in sales growth was primarily due to the lower contribution from our apparel businesses. Against the record high result in the prior year, the group delivered adjusted EBIT of ZAR 5.8 billion, a reduction of just over 14%. The decline in adjusted diluted HEPS was a little bit less than that, at 12.2%, given the benefit of a lower effective group tax rate and the earnings accretion from the share buybacks we undertook last year. Our total dividend for the year is ZAR 265.5 cents per share, based on our dividend policy of a 60%-70% payout ratio.
As mentioned when we last presented, we have entered a period of heavier investment to support our growth ambitions and future revenue streams, and in this context, we can expect a drag on profitability and returns in the short term. Group adjusted EBITDA is down 6.8%, while group adjusted EBIT is down 14.1% as a consequence of the increased capital investments we have undertaken. I will talk more about these investments during the capital expenditure part of my presentation later on. Having done a considerable amount of work to restructure our balance sheet, including the sale of David Jones, our balance sheet remains robust. Group net borrowings total ZAR 5.6 billion, and we are very comfortable with this level of borrowings.
Our net debt to EBITDA ratio is one and a half, 1.45x , which is within our internal limit and includes lease liabilities. Pleasingly, the group's cash conversion ratio increased even further to 95%. This demonstrates not only our inherent ability to generate cash, but also a strong level of efficiency in converting our profit into cash. Our strong balance sheet provides a solid foundation that allows us not to only withstand the challenges we face from the macro environment, but also gives us the firepower to continue investing for the future growth of this business. Our return on capital employed, of 18.7%, remains well above our cost of capital, but has reduced due to the performance of Country Road Group and the long-term investments we are making, including the Absolute Pets acquisition.
On that note, I'm very pleased to say that we completed the deal and incorporated Absolute Pets into the group from the first of April. This business will be reported as part of our food business, but will be managed separately. This is a market-leading business in a fast-growing category, and having Absolute Pets in our stable allows us to achieve our ambition of being the leading pet care destination in South Africa. Absolute Pets contributed ZAR 259 million in turnover and ZAR 18 million in EBIT in the fourth quarter, and has been earnings accretive for us from day one. Before we deep dive into the numbers, I want to briefly provide some context of the environments we have been operating in both South Africa and Australia.
We usually avoid blaming the macro environment for performance, but it has had such a significant impact this year that it simply cannot be ignored. I'm sure you are quite familiar with the external context in South Africa, so I don't intend to dwell on that for much longer. In South Africa, aside from the weak macro, there were several headwinds to contend with operationally. These included the taxi strikes and avian flu outbreak in the first half, and port congestion and failing transport infrastructure that continued into the second half. Thankfully, load shedding has eased in the fourth quarter, which contributed to improved and improving sentiment. In Australia, the impact of the macro on the retail discretionary sector has been particularly severe and deteriorated even further from the first into the second half.
Consumer sentiment has held below ninety for over two years, the longest since the recession in the early nineties. Persistently high inflation in key sectors such as energy costs in education, in healthcare, as well as the prolonged high interest rates, continues to weigh heavily on Australian households. And this, combined with a depletion of household savings, led to a sharp drop-off in store footfall and online traffic, and consequently has significantly impacted the CRG result for the year. Turning now to the key elements of our performance, starting with sales. As mentioned earlier, group sales were up 4.3% year-on-year, while sales in Woolworths South Africa were up 6.7%, driven by the food business. Food sales delivered an above-market performance, especially in the second half, confirming its strength and resilience and the trust that customers place in our Woolies brand.
This was also supported by improved availability. Online growth was also very strong, driven by our on-demand Woolies Dash offering, which increased sales by over 70%. The improved momentum in the second half delivered strong turnover growth of 9.6%, and by 8.5%, excluding Absolute Pets. A really strong performance on the back of lower inflation in the second half and higher volumes. Fashion, Beauty, and Home had a subdued performance, which saw total sales for the year decline by 0.4%. Trade was hampered by several factors, including poor availability, in addition to the challenging macro and disruptions to trade. The second half was also impacted by the late onset of winter, which only set in after June, after which there was an encouraging uptick in our winter categories.
Our ongoing focus on improving the quality of our top line resulted in a further increase in the contribution of full price sales. Beauty delivered strong sales growth of 16%, and we are continuing to invest to make Woolies the beauty destination of choice. Having invested in online, we are very pleased with the growth in this channel of over 30%, contributing a market-leading 5.6% towards South African sales. Our stores in the rest of our African markets also performed better, growing sales by almost 4%. In Australia, as already covered, the macro environment deteriorated in the second half, resulting in a further decline in Country Road sales, in line with a steep drop in traffic across all channels. It should be noted that these sales are coming off a high base in which sales grew by 12%.
Notwithstanding the challenges faced, the Country Road brand grew its turnover, supported by its strong brand equity and investment in new distribution channels. Looking at adjusted EBIT for the year, the group delivered adjusted EBIT of ZAR 5.8 billion, which is down 14.1%, driven mainly by the CRG result. It was also impacted by group's stranded costs of ZAR 126 million, that was previously allocated to David Jones, and which could not be absorbed by the other businesses. As pointed out earlier, group adjusted EBITDA is down only 6.8%, which is less than half the EBIT reduction, and reflects the increased capital investments that we are making.
Adjusted EBIT for Woolworths South Africa includes the food, the FBH, and the financial services businesses, which was up 5.9%, which is an extremely credible result in a very, very tough environment. Food adjusted EBIT is up 12.3% on last year at ZAR 3.3 billion, while FBH is down 9.9%. Woolworths Financial Services delivered a strong profit growth, noting that this includes the IFRS 17 transition adjustment we referred to at the interims. The Country Road Group contributed AUD 51 million to the group EBIT, versus AUD 151 million in the prior year, which had a compounding effect of a disappointing current year result of a very high post-COVID base, in which we delivered record earnings. Let's now turn to the segmental results for each business.
I will talk to the key highlights, and you can find the detail in the appendix to the presentation pack. Let me take you through our food business first. Food delivered an exceptional result for the year, with momentum continuing into the second half. This business is the largest contributor to group profit and remains our strongest, and very pleasingly, we have positive leverage from a 9% sales growth to a 12.3% EBIT growth. I spoke about the sales performance earlier, but want to highlight a few other factors that also contributed to its performance. We continue to enhance our value proposition, which has brought new customers into our stores and increased our loyalty base.
I am delighted to confirm that we have over-delivered on our price investment commitment of ZAR 750 million, made four years ago, achieving a value closer to ZAR 900 million. We have also implemented a new demand forecasting system that improves availability and also has the effect of reducing waste. Our GP margin of 24.7% for the year was 30 basis points up on last year, which was driven by optimized promotions, by efficient seasonal value chain, and lower waste, despite our ongoing investment in price. The second half GP margin of 24.8% was very much in line with last year. Operating expenses for the year increased by 9.7% due to the investment in growth initiatives, including online, and to a lesser degree, to the 3.2% growth in trading space.
This also includes savings from lower load shedding costs in the second half. Adjusted EBIT of ZAR 3.3 billion is up 12.3% on last year, and as previously mentioned, includes the Absolute Pets contribution in the fourth quarter. We also delivered an EBIT margin of 7.1%. Our return on capital employed is 48.4% and 52.8%, excluding Absolute Pets, and remains best in class. Turning to our FBH business. Although we continue to make significant progress on improving the quality of sales and the underlying health of this business, this result does not really reflect that. We experienced a tougher second half, especially in fashion. Admittedly, there are still areas that require attention, such as improving availability across all our channels and regions, and Roy will address this a little later.
Our ongoing reduction of unproductive space was offset by the opening of new WEdit format stores. GP margin for the year was pleasingly maintained at 48.5%. This was achieved through the further improvement in full price sales and markdown metrics, and notwithstanding the higher supply chain costs and a negative mix effect from the increased beauty contribution, which is margin dilutive. We contained expense growth to 2.6% for the year and 0.6% in the second half, tracking well below inflation. This was achieved despite increased investments in our value chain transformation capabilities, and even though the expense growth was extremely well managed, it was not enough to buffer the impact of the lower sales growth.
We delivered adjusted EBIT of ZAR 1.8 billion, which is 9.9% below last year, with adjusted EBITDA declining by 6.7%. Adjusted EBIT margin was 12% for the year, which is 1.2 percentage points below last year, and the return on capital for FBH remains healthy at 21.3%, despite the drop in profitability and increased capital investments. The Country Road Group remains an important part of the group and is still a material, albeit smaller, contributor to group profit. While the overall performance was extremely disappointing, we did achieve some successes, including the complex separation from David Jones, which was completed on time and within budget. We have also continued to invest in expanding our distribution channels during the year, in Myer and in wholesale, which has given us greater reach to new customers.
The Country Road Group includes a number of brands. The Country Road brand, which is the largest brand, achieved positive sales growth, supported by channel expansion and a deep loyalty from its customer base. However, the other brands did not perform well, especially the Politix brand, whose weak performance contributed to an impairment of its goodwill of ZAR 609 million. Responding to the weak trading environment, promotional activity intensified in the second half in order to reduce inventory levels, and this, coupled with the weak Australian dollar, negatively impacted GP margin, which was 230 basis points below last year. Notwithstanding our increased investment in space and channels and the dis-synergy costs from the David Jones separation, costs were tightly managed and increased by 3.6% for the year.
Given the negative operating leverage from the weak top line and the GP margin erosion, the CRG EBIT contribution of AUD 51.3 million was 66% below last year, while the adjusted EBITDA was 33% down, highlighting the impact again of the increased capital investments. Woolworths Financial Services had a strong recovery, underpinned by revenue growth, lower impairments, and good cost control. While the closing book of ZAR 15.4 billion was 2.9% down on last year, there was a substantial sale of part of the loan book in June, and excluding this, the closing book growth was 1.8% up in a tough lending environment. Net interest income grew by 12.8%, due mainly to higher yields on repo rate increases.
The impairment rate moderated to 7%, versus 7.3% in the prior year, and remains well within our target range. The profit after tax increased by 69%, excluding the IFRS 17 transition adjustment. WFS delivered a return on equity of 20.2%, which is double that of the prior year. Let's have a look at our whole balance sheet, cash flow, and the use of capital. Our balance sheet remains healthy, even with the heavy investment cycle we are in and after the Absolute Pets acquisition. Net borrowings for the group were ZAR 5.6 billion at year-end, net of AUD 39 million of cash in our Australian subsidiaries. Net gearing ratios are well within our targeted gearing levels.
More than 80% of withdrawn term debt in South Africa is linked to sustainability criteria, reflecting our ongoing commitment to integrate ESG considerations into every part of our business. We have improved the efficiency of our balance sheet, especially in tough times. Inventory levels are well managed, and we responded swiftly to market conditions. This was to ensure that our investment in working capital is optimized and markdowns are minimized. Our healthy balance sheet provides us with leverage and a strong and solid foundation to continue to invest in future growth initiatives. Regarding CapEx, we previously advised that we plan to spend ZAR 10 billion of CapEx over three years, in line with our strategies as we optimize and invest for growth. We remain fully committed to this target, starting in 2024 .
We spent ZAR 1.5 billion in the first half and a further ZAR 1.7 billion in the second half, taking the annual CapEx spend to ZAR 3.2 billion, which is ZAR 700 million more than we spent in the prior year. Many of our strategic initiatives are multiyear programs. Our plan for FY 2025 includes CapEx of a further ZAR 3.2 billion. This includes our all-important value chain transformation in FBH, which will truly transform processes and operations in that business. Roy will cover this in a little more detail later. Our Midrand DC expansion project will also continue into FY 2025, and further investments will be made in enhancing our capacity and capability in customer experiences, including in store formats, including in category expansion, in data, digital, online, as well as reinventing our loyalty program and platform.
We believe that these are game-changing investments that sets us up to achieve our long-term growth ambitions. Looking at our cash flow, we generated ZAR 8.6 billion of cash from operations. This is based on a 53-week period in balance sheet, and the timing of certain payables negatively impacted our working capital. We generated free cash flow of ZAR 2.6 billion. The ZAR 1.6 billion of net finance costs includes finance cost on leases. Interest charges on borrowings were ZAR 602 million, which increased significantly due to higher interest rates and debt levels. We paid ZAR 2.7 billion of dividends to our shareholders and purchased shares off market for purposes of our employee share plan of approximately ZAR 650 million.
Our dividends, I want to emphasize, our dividends are paid out of operating cash flows, while our term debt has funded longer-term investments. Most importantly, we have a very cash-generative business with a healthy cash conversion rate of 95%. We have been extremely disciplined and very deliberate in our approach to capital allocation within the group over the past few years, and we will continue to diligently apply our capital allocation framework in deciding where and when to deploy our capital. In terms of returning value to shareholders, we declared a final dividend of ZAR 1.175 per share, which takes our total dividend for the year to ZAR 2.655 per share.
I want to end with an update on recent trading for the first eight weeks of the new financial year, as well as provide you with expectations of price movement and space. Food sales momentum has accelerated, with growth of 13.3% for the first eight weeks, and by 10.9% if we exclude Absolute Pets. Trading in the first eight weeks of the prior year did include the impact of the taxi strike in the Western Cape. In FBH, the eight-week sales growth is positive at 1.3%. This is, however, distorted by the timing and the size of the winter clearance in the current versus the previous year, and the shift in the trading calendar with the fifty-third week in 2024.
Full price sales are up by 4.8% on the prior period, while clearance sales are 5.7% down. We expect the price movement for both food and for FBH to average at about 5%- 5.5% for H1. In Australia, trading conditions are expected to remain challenging for the first half of the financial year, with the extent and the pace of the recovery likely to be shallower and more protracted. CRG sales for the first eight weeks are in line with the second half of last year, declining by 11%. However, the month of August has shown an improvement versus July. In closing, we are extremely proud of the performance, the strength, and the resilience of our food business. However, we also acknowledge the challenging year we had, especially in the Country Road Group.
We have fundamentally good businesses with strong brands, which will deliver on their full potential as conditions improve. We are absolutely clear on our strategies and will continue to invest in our growth drivers, and we have the balance sheet to enable that. Thank you again for joining us today. Over to you, Roy, for the strategic update.
Thank you, Zaid. As you may recall, we shared this slide with you at our interim results as a reminder of how far we've come in our multi-step strategic journey. Our group is fundamentally much stronger today than it was even a few years back, and we've made significant progress against a number of our strategies to achieve that. As a group, we're shifting gears from our initial phase of what we called Fix, Strengthen, and Reposition, to our next phase of Optimize, Invest, and Grow, albeit that each of our businesses are at different stages within this overall journey. And that's what I'd like to get into more detail on now.
Starting with CRG, while this past year's performance was disappointing, CRG has been a significant profit contributor to our group for many years, and one poor set of results does not detract from the long-term potential we see in this business. We've always been clear on the steps we needed to take in realizing CRG's ambition, and although we may have shared aspects of this with you before, we probably haven't done enough to communicate the phasing within this. Our first priority was to successfully separate the financial arrangement which tethered CRG to David Jones, which we did just over two years ago. Having done that, we then divested of the David Jones business itself. This transaction turned out not only to be very well-timed, but more importantly, transformational for our group.
It removed ZAR 21 billion in liabilities from our balance sheet, improved our ROCE by more than five percentage points, and has enabled the reallocation of capital and management focus towards more value-accretive opportunities in the core Woolworths and CRG businesses. Our work didn't end when the sale was completed, though, especially for CRG itself, as our first step involved significant work to effectively separate what was a well-entrenched set of shared services between CRG and DJs. This in itself was no mean feat, spanning 60 vendors, almost 300 separate applications, and 150 of our own people's time and energy for over a year. I'm really pleased to say that notwithstanding the scale and complexity of the separation, we successfully completed it on time and about 20% below budget.
While an element of stranded cost remains to be rationalized, this is currently being more than offset by the rental income from the Bourke Street property, which we've retained for the time being. Importantly, CRG is now unencumbered to focus exclusively on the strategies that underpin its own growth ambitions, and central to this is this next phase, which involves resetting the structural economics of CRG itself. This has always been part of our strategic plan, but as you can appreciate, not something we could begin until we had separated the two businesses. We're now at that point and are shifting our full focus to rationalizing stranded and fixed costs, implementing the right operating model, and the right structural economics for CRG as a standalone entity.
This is a discrete self-help opportunity, which is ours for the taking, regardless of the macro, and which will set us up for long-term profitable success. CRG has a number of competitive advantages beyond its leading omni-channel capabilities and its scale and expertise in sourcing and distribution. Perhaps the most important, though, is the advantage of being a house of brands, a portfolio of brands addressing discrete but multiple market opportunities.
The Country Road brand itself remains the cornerstone of CRG and the standout performer, having delivered its best performance ever, even in the very tough macro environment... And as you can see from the slide here, Country Road is by far the biggest of the brands, but it is by no means the only growth driver. Each of the CRG brands have their own market position, their own style aesthetic, and their own strategic direction.
We're focused on ensuring that we maintain Country Road's growth trajectory, while simultaneously fixing, strengthening, and repositioning the other brands. As you're probably aware, there are a number of our CRG brands within South Africa, which is proving invaluable to the group, and in particular, for our Woolies customers who seek a premium proposition. These brands collectively generate more than ZAR 1 billion for us in S.A., and we see a significant runway for further growth here. I'm very pleased to announce that we will shortly be introducing Politix, our contemporary menswear brand, to the South African market, which I think will really resonate with the more discerning and style-focused male consumer. What does this mean for our guidance for this business? Over the past few years, we've been guiding to an EBIT margin target of greater than 12%.
For the past three years, we've consistently delivered a margin north of 11%. But this was in the context of a business deriving benefit from a shared services function, and consequently deriving the benefit of shared cost and the economies of scale that came from that. Having separated from DJs, CRG now is operating as a standalone entity, which it means it no longer benefits from some of the synergies of a shared services infrastructure, and so for now is having to absorb costs it didn't previously bear. This has a direct impact on margin. As a result, we're moderating our guidance to a 10% plus margin for now, to account for the absence of some of the economies of scale from the DJs era. Rest assured, our own internal ambitions exceed that.
But it's important we first progress the work already underway in this final fix and reposition phase in implementing the ideal operating model for CRG, and in turn, the optimum structural economics for this business, before we affirm what we believe an independently set up CRG is capable of delivering. This business has great potential, and what's more, we have the firepower to realize it. I have every confidence in our house of brands' strategic direction and our ability to leverage our competitive advantages so that we emerge from the current economic downturn as a leaner and more resilient business. Turning now to fashion, beauty, and home. As I've shared before, we've done a significant amount of work to fix, strengthen, and reposition this business, and to improve its underlying operational and financial health.
This started with what we refer to as phase one, which included conducting a deep dive analysis into really understanding the market and our customer within that, and then implementing our edit to amplify strategy, with a focus on the must-win categories that we believe really resonate with our target customer. Product that is anchored in the trusted value and quality our customers have come to expect from the Woolworths brand. During this first phase, we identified three key metrics to define what success looked like in building a foundationally strong business: full price sales, markdowns, and trading density. And we made a number of commitments to you around these. Notwithstanding the weaker top line this year, we've continued to deliver on all of these commitments. We've now lifted trading densities by 35%.
Our share of full price sales is well above 80%, and our markdowns have halved to almost 10%, the best these metrics have been in a decade. It's for these reasons we've managed to maintain our GP margin in a very challenging trading environment, and more importantly, it really does demonstrate the strides we've made in increasingly getting our product right. With this stronger foundation, we're now shifting our focus to the next steps in our turnaround by addressing inventory efficiency and product availability. It's something which has admittedly been a legacy issue for us, but it is also our biggest commercial opportunity from here on out.
We've shared with you before that we're investing over ZAR 1.5 billion in what we call our value chain transformation, or VCT, one of the most transformative initiatives undertaken by our FBH business in decades. Our VCT will drive multiple capability shifts across systems, processes, and logistics, including the delivery of an enhanced planning capability and a centralized inventory model. We've already got several initiatives in play. We're rolling out RFID, and our distribution center and transport optimization work is already delivering results. Half of our sourcing already comes from within SADC region, and we're increasing this to 60% in the next couple of years. We've also fundamentally transformed our ways of working by reorganizing our business to create a world-class sourcing capability.
This means our sourcing teams can focus on leveraging the supplier base in a more strategic way to improve speed and flexibility, while simultaneously unlocking cost and efficiency benefits. And that's positively impacting our intake margin, with even more to come. Our product design and development function, on the other hand, can now focus solely on applying market and competitor insights to delivering product ranges aligned to our customer and commercial strategy. And by doing this more smartly, leveraging AI-driven market research tools to derive insights into competitor pricing, promotions, assortment, and trends across both local and global retail, we're making better and more informed decisions, decisions that are increasingly resonating with our target customers.
In addition to these initiatives, as mentioned before, our biggest opportunity lies in getting our availability right, especially in our smaller and medium-sized stores, which accounts for over 60% of our turnover.
During the past year, we've implemented numerous tactical solutions to address some of our challenges, and that improved our availability of core lines by over 2% in the second half. The longer term solution, though, is about moving from an inventory model where we essentially push product into stores, to a centralized pull model, which is informed by customer demand. Essentially, we need to ensure that we have the right product in the right quantities and sizes at the right place when the customer needs it. As you may appreciate, these are not quick-fix solutions.
VCT is a sizable and complex initiative that touches every area of our business. It is gonna take a little bit more time, but we know what we need to do. We're already a year in, and we're already seeing some of the benefits come through, with a lot more to come.
What is particularly exciting, though, about this initiative, is that it is on us, a team with a track record of delivering on commitments. So I'm confident that we'll get this right. In fact, it's going to be a game changer for FBH, and we'll not only complete this next phase of our turnaround, but permanently shift the trajectory of our fashion business. And now turning to a few of our growth stories, because it's not just the turnaround story for FBH, there are a number of growth opportunities we're going after. Firstly, we see significant potential in our FBH online business, which performed very strongly in FY 2024, growing at more than 30% and providing strong momentum to increase penetration even further. Secondly, our Africa business offers significant scope for further expansion.
These are markets we already trade in, so they're well known to us, and we're known to those customers. Importantly, we realize our higher EBIT margin in Africa, so it's also profit accretive growth for us and will become increasingly so as we scale. We also see exciting white space opportunity in our newer small format WEdit stores, which are enabling us to provide customers with a curated version of the best Woolies quality product, conveniently located within their neighborhood. Not only is this attracting new customers to our brand, but by deliberately targeting locations adjacent to our food standalone stores, we're driving higher cross-shop. And we know these cross-shop customers are roughly ten times more valuable than those who shop either food or FBH in isolation. So it's a strategy that's really working for us.
We've been clear for a while that our opportunities aren't limited to apparel, so we've developed discrete strategies for each of our fashion versus beauty versus home, and that's paying off for us. Our beauty business has once again delivered an exceptional result, growing both customers and sales in the double digits. We've doubled this business in just a few years, and we're on track to double it again, confirming our position as the beauty shopping destination in the market. Now, while some of this growth is coming from our strong branded beauty business, where we are increasingly the destination of choice for aspirational beauty brands and houses, what really differentiates us is our W Beauty private label range, which in fact is the strongest performing part of the broader category, accounting for roughly a quarter of our total beauty turnover.
And so to support this potential we see here, we've recently opened an exclusive manufacturing facility in Cape Town that will drive research, development, and innovation in the beauty space so that we continue to set ourselves apart. What's more, not only do we see beauty as a discrete opportunity for growth, it's further enhancing our position as a quality lifestyle brand. To this end, we've just launched our first beauty standalone store in Waterstone Mall, further complementing our overall offering of Woolworths Foods, W Cellar, and our new cafe format within this mall, and there's more to come.
I'm Megan Africa. I head up Beauty Operations, as well as the Beauty Academy for Woolworths. I think in the current context, you know, customers really are looking for personalized experiences. It was something that we've always had as part of the ambition to give our customer the best beauty experience. The time was just right. We worked really closely with store design to ensure that the space really lent itself to customer, you know, the personalization, but also offering bespoke and curated range of products. We are very excited to have partnered with key brands to offer the customer the most beautiful sort of product offering, as well as beauty experiences from facials to nail treatments. Everything from concept to design, as well as the fixtures and fittings, is so well thought through.
We're also so excited to have partnered with, a local NPO that is going to be, you know, assembling our beautiful tree behind me. So it's all beautifully, sustainably put together, with so much thought and a lot of love and passion as well. So the store will also have a beautiful range of local as well as international brands. W Beauty is really kind of at the heart of everything that we do, so you have the opportunity to shop all the beautiful W Beauty products, from refillable eyeshadows as well as powders. And then, yes, our local skincare brands, you can't do without things like Skin Functional, Lelive, as well as SKOON. So there's definitely something for everyone.
With regards to our margin guidance for FBH, this is a north of 14% margin business, and that hasn't changed. But the various headwinds we've experienced this past year have impacted the timing of when we expect to reach our target. Unless we see a rapid rebound in macros, it's unlikely we reach it this year or even next, but I'm absolutely confident we'll achieve it in the medium term. So 14% plus remains our guidance. We have clear plans. We are executing against them. Phase one is not far from complete, and phase two is well underway. And lastly, let's look at food. Not too long ago, there was some concern that our foods business was ex-growth.
I think our performance over the past two years has quite definitively proven otherwise, and that's the result of our steadfast commitment to not only maintaining, but further strengthening what we call our Holy Grail, providing our customers with the best overall proposition in the market and our shareholders with the highest return on capital in the sector. And we'll continue to do just that. In fact, you're going to be seeing a lot more from our food business.
But first, let me remind you of what we said we would do, what we did, and what we will continue to do to further affirm ourselves as the market-leading food business in South Africa. Firstly, we've made significant improvements in our on-shelf availability through a more elevated and sophisticated approach to category management, and by leveraging our customer data and advanced analytics to drive hyper-localization.
This past year, we've implemented a new demand planning system, which has laid the foundation for even further improvements in the year ahead. Secondly, we've really dialed up our differentiated value proposition. We've invested almost ZAR 900 million in price over the past couple of years, even more than we said we would do, which has fundamentally shifted perception in the market. But it's not just about price, it's what we call trusted value. That unbeatable Woolies difference in quality at the best possible price. So we've really amplified our value proposition, our competitive advantages, our premium quality, ongoing product innovation, convenience, and unparalleled service, all underpinned by our sustainability credentials. These are the attributes that constitute our Woolies difference, the very attributes that others can't deliver, even if you gave them more than sixty minutes.
Lastly, we said we'd increase our marketplace presence, and we've done just that, be it through communication, through social media, through our various online channels, or in our physical store environments. We're showing up more in all spaces, ensuring more connections are made with our existing customers and with new ones, and that's driving bigger basket values, higher footfall, and a greater share of wallet. In fact, notwithstanding the pressure consumers are facing, we've managed to attract 6% more VIP customers this year, as more and more customers recognize us as having the best overall proposition in the market, our Holy Grail. One of the key ways in which we're enhancing our marketplace presence is through our next-gen format, which really anchors our stores in our competitive advantages. Our fresh and other well-known Woolies categories, our sustainability credentials, and a market-leading shopping experience.
You'll now be able to get your coffee at the front door, and as is in the case with the kitchen traditionally being the heart of the home, we're positioning our kitchen, our expanded daily counter, at the heart of our store. We've rolled out six of these next-gen formats so far, with very, very positive response from our customers and a significant uplift in sales, reflecting not only the effectiveness of these new formats, but how we are raising the bar in premium food retail. But we're not just investing in our brick-and-mortar stores. Our foods business delivered excellent growth in online sales, too, driven by our on-demand Woolies Dash offering, which grew by more than 70% on last year.
We've extended shopping hours, we've increased our delivery capacity by more than 50%, and we're seeing very good efficiencies coming out of the first of our dark stores, with more to follow. We've made improvements to our app by focusing on speed and stability, and by improving our search engine. We're also investing in our core systems to improve our app experience. But the stat that I'm probably most excited by is the fact that 7% of all Dash customers are completely new to the Woolies brand. So these are some of the things we've done so far, but what's more exciting is what's to come.
We've identified a number of adjacent categories and formats in our foods business, where we see significant growth potential, many of which are now housed in Woolworths Ventures, which you'd recall we launched as a growth accelerator earlier this year.
That includes our cafés, coffee, and new formats, or what we call food services, which delivered more than 20% like-for-like sales growth for us over the past year. Now, while we currently have about 100 cafés and 100 coffee pods or hatches, we have over 350 food stores, which gives you a sense of the runway for organic growth that we see to build a really big food services business that is anchored in and showcases our iconic food brand. We also see opportunity to expand our W Cellar business. We currently have double-digit market share in wine, but a much lower penetration of the overall alcohol beverage category.
In aggregate, it accounts for only 1% or 2% of our total food sales, whereas more than 10% in the case of many of our peers, which represents a significant opportunity for us, and as you would expect, we're doing it in the Woolies way, offering a truly unique and differentiated customer experience. Another growth category that we're doubling down on is pet. Pets have always been an integral part of the family, but what we're seeing globally, in fact, is increased spend in assuring their well-being, so our determination to lead in this category was a key motivator behind our acquisition of Absolute Pets. This is a great business with a complementary brand positioning, loyal customers, and a well-established market presence, and it enables us to leapfrog in becoming the pet care destination of choice in South Africa.
It is also testament to our enhanced ability to identify opportunities and make margin-accretive acquisitions for future value creation, so we have a number of newer avenues for growth, but what we're doing here in many instances is really leveraging our existing world-class core capabilities. For example, in setting up any food services business, the most difficult part is typically setting up the back end, effectively the sourcing, supply, and distribution of product, but we've already done all of that, and in fact, it is this very capability that we've established in our largely exclusive supplier partnerships, in our centralized distribution, that is not only difficult to authentically replicate, but really sets our food retail business apart, and so we're leveraging these existing capabilities to now build a market-leading food services business. Looking further afield, as is the case for FBH.
We also see great potential in our Africa businesses, which is delivering twice the growth of our overall South African business. While we're not new to these countries, we've spent time and resources over decades, really understanding select markets, building relationships, securing direct supply with farmers, and developing local talent, and that's what's paying off for us in the growth we're seeing now, and expect to continue to see from these existing markets. It goes without saying that growing a world-class food business requires ongoing investment, and a big part of this is the ZAR 1.7 billion we're investing over the next three years in expanding our Midrand distribution center. It's a sizable investment, but it's vital to ensuring future growth, and is further testament to the potential we see in our broader food business.
I'm very pleased that notwithstanding this level of investment, we remain very confident in our EBIT margin target guidance of greater than 7% for the medium term. Turning now to our outlook. In South Africa, prospects appear more positive following the national election and the formation of the Government of National Unity, as well as the more recent suspension of load shedding and the easing of inflation. The trading environment is, however, expected to remain somewhat constrained as elevated interest rates continue to pose a headwind to consumer demand. The same is true for Australia, where the pace of macro recovery is likely to prove much more protracted than initially envisaged.
While we're mindful of the prevailing macro environment, particularly in Australia, I am encouraged by the considerable progress we've made against our strategic initiatives, our strong foundation, and high cash generation, as well as the competitive advantages that not only set us apart, but position us extremely well for sustainable and profitable growth. We are clear on what is important and confident in our strategies and approach. We will continue to make decisions in respect of both our Australian and South African businesses, not just for today, but for the years to come, and that's exactly what we're doing. While we're continuing to strengthen and reposition certain areas of our business, we're also fully focused on optimizing, investing, and accelerating new growth opportunities.
In closing, before we open for Q&A, I'd like to acknowledge and thank our customers for their loyalty and support, and also thank our suppliers and partners who play their unique and integral part in making our Woolies difference exceptional. As I've said before, we have an incredible team of people whose collective energy, determination, and passion for our brands are the true foundation of both our past achievements and our future success. Thank you to each and every one of you. I firmly believe we are on the right course, and together are building a bigger, better, and far stronger business, fortifying our position as South Africa's preeminent retailer and one of the country's leading brands. At Woolies, we don't just care about the details, we obsess over them.
Whether it's a product, a service, a simple, warm-hearted greeting, we know that by focusing on the things that matter most to our customers, we'll make a meaningful difference. We'll add quality to life. It is, after all, the details that take something from being simply good to truly great, and that is our difference.
One in a million million, some say the chance of a planet having the exact conditions for life. A few tiny details, the difference between us being here and not being at all. Every style, every stitch, every tiny pinch matters. Every drip, every decision, every quality moment matters. The details make the difference.
Good morning again, everyone, and welcome to the Q&A section of our FY 2024 results presentation. Jumping right in, Roy, a question on FBH. Your FBH margin went backwards in FY 2024. What gives you the confidence you can still achieve a greater than 14% margin, and can you clarify the exact timing of this?
All right. Well, thanks, thanks for the question. I mean, I think there are a number of drivers behind this, at both the top line and from an operating cost perspective. From a top-line perspective, firstly, we're seeing continued improvement in product resonance, particularly in what we've called our must-win categories. We've done a lot of work to get our product increasingly right, which is what is reflected in the improvements you're seeing in full price sales, and we expect that to continue. Secondly, while we haven't historically been very good at getting our product into all of our stores when the customers need it, so improving availability is a big opportunity for us. In fact, it's our biggest opportunity to improve our top line and overall our trading densities.
And thirdly, I think, I'd also mentioned in the presentation, that which, we're achieving input margin gains from the work we're doing through our value chain transformation to consolidate sourcing. I think increasingly from here on, we'll look at reinvesting those gains into further improving our value proposition in the market, whether it's through price or even better quality. We have a number of levers we're working on from a top-line perspective, and we also see scope to improve our cost to sale ratio, further rationalizing what we call unproductive space, simplifying our structures, and obviously streamlining some of our ways of working. Yes, pretty confident in our ability to achieve our targets by FY 2027.
We're investing quite heavily in our value chain transformation this year, but from FY 2026 and certainly FY 2027, you'll start to see these margin gains coming through strongly.
Thanks, Roy. You've lifted your FBH GP margin by almost 5% over the past few years. How much more can we expect, and what will drive that?
Well, I mean, I don't think you should expect to see further GP margin gains from here. Partly given the opportunity we see to reinvest in our product, to drive stronger top line, which is what I've already mentioned. And then secondly, given the strong growth we've seen, and expect to be seeing from beauty, which is a lower margin category than the rest of the fashion business. And also, as I've mentioned in the earlier question, we see EBIT margin expansion from here really being driven by positive operating leverage, not by GP margin.
Thanks, Roy. A couple questions, sticking with FBH and largely related to our trade in the first eight weeks. So, Zaid, probably for you, can you please talk to the trading dynamics impacting the 1.3% sales growth for FBH in the first eight weeks? Another question: please comment on the impact of shorter, warmer winter on FBH sales and margin. Is there a meaningful stock overhang going into warmer spring, summer, and how have you addressed the stock? How do you have lower sales in the first eight weeks post-financial year end? Is there any stock that you would hold over into next year? So there's a fair bit there.
There you go, Zaid, you know, 20 questions in one. Good luck.
Yeah, yeah, that's a pretty long question. But I think to start off with, for those of us living in the Western Cape, I would not call our winter short, and I wouldn't call it warmer. I think for those living here will know how cold and rainy it's been for the last two months. Having said that, let's get sort of to the question itself. What we've disclosed is that sales for the first eight weeks have been 1.3% up, but within that, I think it's important to unpack what's in that number. Our full price sales for the first eight weeks has been 4.8% up on last year.
It's a stronger number and a better reflection of the quality of the trade we've had in the first eight weeks. That's the first part in terms of the full price sales. Our clearance sale, which is what we've gone into from week four onwards, has been a smaller clearance sale. This also talks to the quality of the inventory we had at year end. We were deliberate in terms of how we managed our level of inventory at year end. It was, you know, a lot from a quality perspective, a lot better, and therefore, we've got a smaller clearance sale that we've had into the period going forward.
We also started our winter markdown a little later this year than we did in the prior year. And this, of course, negatively impacted the top line, although it will be beneficial to the GP margin. If you will, if those of you who have been into our stores or perhaps even shopped online, you will notice that this year we went into the clearance sale from week four onwards. Last year, we went into clearance from week one onwards. So there's a bit of a timing difference between this year versus the prior period. The other thing to keep in mind as well is that in the last financial year, we had a 53-week year trading period, and therefore, when we look at the comparable period this year versus last, they're not entirely comparable. There's a distortion in the numbers.
However, if you do look at it from a comparable trading week on week from this year to last year, the sales growth is actually in the high single digits. But of course, when we report numbers, we report on a financial basis, which is the 1.3%.
Thanks, Zaid. Couple questions on Australia. Roy, how much of the CRG disappointing performance is due to structural issues with the brands and business versus cyclical weak macro?
Yes, thanks. I mean, there's no doubt that this year has been disappointing for us in Australia. But I don't think one can fully ignore the impact of the current macro environment, and that the impact that it's having on consumers and in particular, Australian retailers. I mean, we've seen a double-digit decline in footfall continuously throughout the course of the year, and there's also been a litany of businesses and brands that, in fact, have not made it through. So, I mean, this is a moment in time, for reasons I think I explained in the presentation, so it is important to understand the context. But the fundamentals are very much intact. This isn't a structural issue. We have a great portfolio of brands. It's a self-funding business.
We see a lot of runway to expand our presence across a number of channels, and particularly now that the David Jones transaction is fully complete and CRG is totally separated from David Jones, we are pushing ahead with our plans, which for CRG really includes the operating model work, which is already well underway, to really reset the structural economics of this business. So we're very confident in our strategic direction and the plans we have in place. I think it's also important to remember that while CRG has weighed on our group results in the current period, it wasn't too long ago when this business was, in fact, the strongest contributor to our earnings growth.
And that really, in fact, talks to the importance and the benefit we get from being a diversified portfolio of businesses.
Thanks, Roy. We have a question: How big is the Country Road brand in CRG versus the other brands? We don't disclose the individual contributions-
Right.
but Country Road is by far the biggest at just over half. Roy, why did you revise your guidance for CRG downwards?
For two reasons, really. Firstly, as I mentioned in our presentation, CRG has until now benefited from the sharing of services and infrastructure with David Jones. So effectively, it's had an economies of scale benefit, which is no longer the case, and this now means that CRG is having to carry costs it didn't previously bear. Having now separated the two businesses, we can set CRG up, as I've mentioned, in the most ideal and optimum way, and we're giving ourselves some time to do that. Secondly, we're coming off a lower FY 2024 base, which has been, in fact, very heavily impacted the business and been impacted by the pullback in macros.
I also think, I mean, we must appreciate that in the near term, these factors will have an impact on margin, which is why we've been conservative and revised the target down to greater than 10%. But as I said, you know, our own internal plans exceed that, and that's the work we're undertaking at the moment to reconfigure our structures and ways of working to effectively unlock that opportunity.
Another question somewhat related to, Country Road Group margins. Zaid, probably one for you. Can you provide some guidance on how much capital is required to scale CRG to achieve the more than 10% EBIT margin target?
Sure. We believe that in order to get CRG to normality, we'll actually require a normal level of CapEx, not any more. If you recall, we've actually have spent a fair amount of CapEx already in the past three years, both in terms of you know, new space, in terms of new channels, in terms of our online. So a lot of the big investments have already been made in the Country Road Group.
Mm.
We just need to leverage off this investment we've already made, so going forward, it is just gonna be a normal level of CapEx that we expect to spend in Country Road.
Thanks, Ed, and while you have the mic, how long can we expect you to reference stranded costs? Are these costs going to be cut out, or are they part of the permanent cost base going forward?
So let's understand the stranded costs in terms of what they are first. Stranded costs are effectively the group costs that we had that we allocated across each of the operating entities in the group. And of course, we did in the past, when we had David Jones, allocated this a part of the cost to David Jones. We did tell you last year, I think, that it would take almost you know, between 18 and 24 months to take this cost out of the business, and we are all on track to deliver on that. The intent certainly is to... So what we've done this year in FY 2024, we have shown a separate line of what those stranded costs are.
Next year, in terms of FY 2025, will be the last year in which we would show you that separate line, and really, the intent is very much to, on the one hand, to reduce that cost and then to make that whatever is the residual cost to become part of the base of the existing businesses.
Thanks, Zaid.
Thanks, Zaid. A question, Roy, on Dash. You've grown your Dash sales very strongly over the period. Does this mean you're taking market share in the online space?
Yeah, well, it certainly, it certainly speaks to gaining new customers. I mean, our Dash sales grew by more than 70% this year, and in fact, what's most pleasing is that 7% of all Dash customers are completely new to the Woolies brand, so we're acquiring customers in the process. We've continued to roll out Dash. Now, more than 90% of our customers can access the service. We've increased slot capacity. We've extended trading hours. We've increased pick rates. Our new search algorithm, which went live last quarter, is driving double-digit growth in cart size. We're also rolling out dark stores. It's a strategy that's really working for us, and then, you know, maybe if I can just remind you, Dash is profitable on a fully costed basis, and that is without any direct contribution from any of our suppliers.
So, Woolies Dash, I mean, is now an incremental profit contributor for our business. Our customers love shopping in our stores. We love that they love coming into our stores, not just for the experience, but also because that's how we best showcase our phenomenal innovation and new product development capability. But, I mean, I think we do absolutely recognize that you cannot beat the convenience of online. So of course, we'll continue to invest in this channel and keep improving our proposition here overall. You know, it is a measured approach for sure from us. We're not cutting any corners. We're maintaining our cold chain, and also things like, you know, the way we approach and manage our driver fleet.
These are all things that are really very central for us as we continue to grow, invest and grow this channel.
Thanks, Roy. Next question: Some of your food peers are having a tougher time. How are you thinking about the competitive landscape and the food environment, and what does this mean in terms of some of the opportunities you see for your own business?
Yes, I think we love, we love talking about our food business, but I'm certainly not gonna comment directly on any of our peers. There's no doubt the environment remains very competitive, but always has been. So we're very focused on controlling, in fact, what's within our control and doing what we do best, which is really about this Holy Grail I reference. We'll keep driving innovation. 10%-20% of shelf space is new every year, and that's not gonna change. We'll keep investing in price and keep improving our premium quality, and we'll keep giving the customer the best in the market, both in our stores and online. But we're also very clear on who we are and what we stand for in premium food retailing.
We don't want to be all things to everyone, so we're not going to chase indiscriminate space. We're not going on a land grab just for the sake of it, and we're not going to cut prices to play in different segments of the market, because that will compromise the other side of our Holy Grail, which is about delivering the best returns on capital in the sector for our shareholders, and doing that at scale, too. So, yes, I think we do see more opportunity to take market share than we have done in a little while, and our strategies incorporate that, but it'll be profitable market share so that we sustain the financial metrics this business is all about.
Thanks, Roy. In respect to your food sales growth for the first eight weeks of half one, FY 2025, Zaid mentioned that the taxi strikes impacted the base. Can you remind us just how much of an impact this had in the prior year?
Yeah, the strikes we had last year was very much at this time, in the first seven, eight weeks. In fact, just to remind you, it affected both our food business and affected the FBH business. However, food was harder hit than FBH, as we had to close our DC, and of course, we had to close some of our stores as well. The food sales growth for the comparative period was 8.3%, and we did tell you, I think, at the when we did this equivalent period last year, that the impact, the estimated impact of the taxi strike was circa 1%. So despite the fact, despite the impact, the base was still a relatively strong 8.3%.
The first eight weeks of the current year, FY25, is going by very healthy, 13.3%, and if you exclude Absolute Pets from that number, it is still a pretty strong 10.9%. Quite importantly, I think it's, we're very, very pleased at seeing positive like-for-like volume growth. What we are seeing within this, the sales growth is, as inflation's coming down, price inflation is coming down, our volume is going up.
Thanks, Zaid. Probably another one for you. Please, could you unpack the component parts of your GP margin gains in your foods business, and how sustainable do you think these gains are?
Absolutely. It's been a very strong performance. We've increased GP margin by point three percentage points year-on-year. This was, as I've said in my narrative, going through a number of things, particularly in the first half of the year. We've optimized our promotional activity. We are selling more volumes at full price versus promotional pricing, which really speaks to our trusted value offering that we've got in the market. So that's the one area. The second one is our various efficiencies in our value chain that we have been able to deliver to the bottom line. Thirdly, we've been a lot better at the management of waste.
Not only managing waste but also reduced waste, as we got better at matching our demand to supply and the availability. I think what we called out in the first half, we were also a lot better at managing the demand during load shedding. A lot of that savings we actually had delivered from the load shedding impact of waste actually came through in the first half. The second half was very much in line with last year, at 24.8%.
The gains are absolutely very, very sustainable because the improvements that we have made include a number of drivers behind that, between category management, our demand forecasting system, better use of data, and all these improved processes overall will make these gains sustainable.
Thanks, Zaid. We have a question on Absolute Pets: How many Absolute Pets stores were purchased, and what is a sustainable EBIT margin for this business, as Q4 was 5.7%?
Yeah.
I think that looks right.
I'll take that. Thanks, Jeanine. I mean, yeah, it is, I mean, it is a great business, and we're obviously very pleased that they're part of the Woolworths family now. We currently have just over a hundred and seventy Absolute Pets stores across the country and obviously looking to continue to grow this. On the margin question, I think if you calculate the margin implied in the revenue and profit numbers we gave you for the months that it's been included in our results, it's probably closer to 8%. But either way, there would be a seasonality impact in the quarterly numbers you saw. But on a full year basis, this business trades at a higher margin than our overall foods business, and we expect that to continue.
Zaid, a question for you on our balance sheet. Your net borrowings have increased by ZAR 1.5 billion since interims and by more than ZAR 3 billion since your last financial year. Can you unpack that and how we should think about your debt levels going forward?
Sure. So yes, our debt has increased by ZAR 3 billion over the course of the year, and as I said, I think in my presentation, it was one and a half and one point seven between H1 and a H2 . If you look at the cashflow waterfall we've got in the slides, we'll give you a good indication of some of the more evident places where we've actually spent our CapEx. So you will notice there that we've actually talked about the acquisition of Absolute Pets, which was roughly about ZAR 600 million. This, of course, has been earnings accretive from day one. We talk about the...
We've gone into the market to acquire our shares for the purposes of our employee share scheme. That also was about just over ZAR 600 million that was used for that purpose. We're also calling out the significant strategic investments we are making, which are the long-term investments around Midrand DC, the expansion of Midrand DC, the value chain transformation, and a whole host of other strategic initiatives that have long-term benefits. Of course, within the cash flow, you will see that there are also some timing differences. We had a 53-week year in FY 2024, and this causes some timing differences, particularly with regard to our working capital.
Of course, you will see some timing differences between our dividend that we've paid, and the current year relates to the profits of the prior year, and that sort of thing. So we are quite comfortable with the level of debt at the level of debt we are at. Our leverage ratio of net debt to EBITDA is 1.45x , and we manage our business according to that. All decisions we make with regard to capital allocation, whether it's to do with CapEx, whether it's to do with the dividends that we pay or to do with acquisitions, is very much done as part of our strategic approach to capital allocation and in terms of our capital allocation framework.
Thanks, Zaid. Roy, we have a question on WEdit. How many WEdit stores do you have now, and how many can we expect over the next three years? How do the densities of these stores compare?
Yeah, thank you. Thanks, Janine. Yeah, I mean, I think we have just over 30 WEdit stores today. You know, we think there are multiples of this in terms of overall potential. We're opening up between 10 to 20 a year. And it is providing opportunity for us to get the brand into spaces that we typically would not have been able to go to with our traditional big box sort of retail format. So very excited about the prospect, the opportunity here. The trading densities are typically fairly significantly higher than that of our big boxes. And so therefore, you know, as we roll these out, we expect that to be accretive to us going forward.
Thanks, Roy. I think we'll probably, in the interest of time, maybe take two last questions. This one on foods: One of your peers has a very aggressive target in terms of their store rollout plans, whereas you're only planning on opening twenty-two food stores this year.
Yes.
How do you expect to sustain your top line growth if you're not expanding space?
Yeah, that's a good question. I mean, I think, yeah, we see we certainly see scope for expansion in a number of areas beyond just putting down new stores. You know, firstly, I think, we, we're looking to expand space in our existing stores. Our food trading densities are over ZAR 160,000 per sq m on average, but we have a number of our stores that could easily be closer to ZAR 300,000 per sq m, and are effectively, therefore, over traded. It's instances, I guess like that, that we'll be looking to expand space within the existing store, and part of that is about creating space for some of our newer categories, like pet, like wellness, like alcohol beverage sales.
Then, you know, secondly, we're also, I think importantly, implementing what we call our store of the future. It's the next generation format of Woolworths stores, which we've now sort of laid down six already, and they're certainly driving significantly better sales, some great uplift, and better densities. Then, I think we have a number of new formats, which we've spoken about before, particularly in what we call food services, which is still quite small for us in a relative sense. So you're not necessarily gonna see that space growth impact our overall footprint guidance just yet, but we see huge potential here. This business is growing at between 20% and 30% a year, and we have plans for it to become multiples of the size it is today.
So I mean, we absolutely see scope for expansion, both in new stores, but by also expanding existing ones. And beyond our physical stores, we're accelerating the growth of our online business, particularly Woolies Dash, as I've mentioned. That's bringing new customers for us, and we're seeing incremental sales from this channel, too. But the strongest opportunity we see in growing our business is in the like-for-like sales area, and that's coming not just from new customers, but also from increasing our share of wallet from existing customers. I think the most important thing here, though, is that we're being very deliberate about how we go after growth, both through new space, but also from a like-for-like perspective.
Being very deliberate about this means that we're focusing on profitable growth, and I think we can see, if you look at our sales growth, how we're converting that into profit growth. It's really working for us.
Thanks, Roy. I think our final question: Having completed the acquisition of Absolute Pets, can we expect more acquisitions?
Yeah, we sort of always get this question, but, I mean, you know, we're never gonna rule out further acquisitions, and we'll consider, you know, appropriate opportunities, you know, certainly if they make sense, and if they sort of line up and stack up against, what we've laid out in our capital allocation approach and framework. You know, I think we've already mentioned that we are investing very heavily at the moment, ZAR 10 billion over the next three years. You know, the automation, expansion, modernization of our Midrand distribution center, our value chain transformation work within, fashion, our store network, that I've just spoken about, our online capabilities, data, digital, significant investments going in there. So I think what this shows you is that we see significant potential in our own businesses.
Bear in mind, half of this CapEx is going toward growth and what we call growth-enabling initiatives. So it's really a massive vote of confidence that we have in our strategies and the direction we're taking. But, I guess, yes, I mean, we would consider M&A, just like the nature of an Absolute Pets acquisition that we've recently made, if it makes sense, and if it satisfied the criteria, that we've laid out. We're very disciplined, in our approach to going after inorganic opportunities.
Roy, Zaid, thank you very much. I think we will, we'll round it up there. It does bring our FY24 results presentation to a close. We obviously have the opportunity to engage with a number of our shareholders and equity analysts over the next couple of days.
Yes.
which we look forward to.
I'm looking forward to that. Thank you, Janine, for coordinating this, and thank you to everyone for dialing in.
Yeah.
Really appreciate it. Thank you.
Thank you very much.