Consumer Industries Editor

CAPE TOWN Clothing, textiles and food retailer Woolworths Holdings had pulled back on expansion of its international franchise operations owing to the strength of the rand , CEO Simon Susman said yesterday.

It would reconsider the situation in the next six to nine months.

While the group's South African and Botswana franchise operations are performing well, earnings from franchises elsewhere were being hurt by the rand's strength. The group has recently closed its franchise in Saudi Arabia.

Woolworths Holdings results for the six months to December showed that headline earnings rose 20% to 40,2c a share compared with the same period in

2002 and a distribution from share premium of 13c (10,5c) a share was made.

JP Morgan retail analyst Natasha Ingham said this was a solid set of results, coming off a high base, for a business that has essentially not added any new formats but grown its key brand.

She had some concerns about volume growth in the textile business but management was addressing the issues. Some of these involved price competitiveness and "could not be changed overnight while maintaining quality specifications". Revenue rose 10,5% to R5,6bn.

Susman said this was not a reflection of falling inflation but of a change of mix in the business. The food division, which operates on lower margins, has been growing in the past few years. In the clothing division, franchises have been expanding faster than company stores.

The increasingly important financial services business does not contribute to costs of merchandise, it boosts the ratio of net profit to turnover.

Operating profits rose 23% to R545m owing to higher interest earned on a larger debtors' book and control of costs.

Country Road, the group's Australian operations, reported an operating profit of R4,9m, down from R7,4m a year ago.

He expected the results to be lower as Country Road had ended its relationship with one major wholesaler. But strategies had been put in place that should translate into a more positive result later in the year, he said.

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Feb 13 2004 07:21:06:000AM Charlotte Mathews Business Day 1st Edition