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When talking about Woolworths customers, Simon Susman, the chief executive, likes to refer to them as "her".

It's not hard to understand why: between 75 percent and 80 percent of the 1 million people that pass through the retail chain's doors each month are female.

"Those men that do come tend do quite a lot of listening to their wives and girlfriends," Susman points out. As a result, the business is constantly trying to get into the mind and psyche of its female customers.

The large number of female shoppers is one of the main factors behind the success of its women's lingerie division, where Woolworths enjoys a leadership position with 34 percent of the market.

But while its lingerie division has always been a mainstay of the business, its other divisions have been through ups and downs.

Woolworths had been a part of Wooltru, which owned 45 percent of the business before it was unbundled in 2002.

In the late '90s Wooltru embarked on a major expansion drive, snapping up businesses such as CNA and Topics and creating an information technology joint venture with Datatec called Affinity Logic.

The expansion drive, however, started to come unstuck. In 2000 Wooltru management had to admit defeat, saying that shareholders and investors were not supporting its strategy. It decided to unbundle its holdings.

But the damage was done. Woolworths started to flounder as Wooltru management took its eye off the ball.

In 2000 Susman was appointed as the chief executive to, in his words, turn around the business.

In the 2001 annual report, Susman said the core business of Woolworths was in danger of becoming an "ex-growth cash cow".

He warned that the retail chain was losing credibility with its customers.
"They would shop more from the chain if we stopped letting them down," he said in the annual report.

Looking back, Susman says the problem started when Woolworths lost its sense of where it traditionally operated.

It was under threat from a new breed of low-cost retailers like Mr Price and instead of doing what it knew best, management reacted to the challenge.

"We got diverted by them [rival retailers]," Susman says. "Instead of looking to ourselves and saying this is what we need to do for our business and for our customers, we started to follow our competitors, which is never a good thing to do in a highly competitive industry."

Woolworths customers were also upset at the lack of availability in its food stores. The textile division, Susman says, had become an unpredictable place to buy clothing.

Even so, Woolworths' South African operations were able to report an improved set of earnings before exceptional items, up 22 percent to R465 million in 2001.

So was the business then in real danger?

Susman says he liked to make people think so.

It's a traditional tactic to follow in management changes: get the employees and staff, as well as shareholders, concerned so you can force the change.

This way, Susman says, he was able to get people to think differently.

"We needed to stop following our competitors and re-establish what were the issues around Woolworths and our relationship with our customers."

Susman says the business had been compromising on price and quality. It needed to fix this, as these two factors were key ingredients in Woolworths'
past success.

By the end of the 2003 financial year, Susman had delivered: the group had posted three years of real earnings growth. The market capitalisation had grown to R5.3 billion, from R3.2 billion in 2001.

The inventory turn was a remarkable 21.8 times every year, meaning that nearly every month it was selling its goods twice over.

Investors had rewarded the firm, with the share price gaining 61 percent over the period.

Susman was also richly rewarded with a performance bonus of R3.8 million.

Susman, however, is not letting this performance overwhelm him. He points out that in the retail business - especially in clothing, were there are long lead times - you are never assured of success.

"You are constantly trying to deal in future aspirations. So you can never be absolutely certain that you have got it right until you put it on the counter."

Even the phenomenal growth rates in the clothing sector are not a guarantee of success.

To make sure it is keeping up with the trends, Woolworths has in its employ a team of designers travelling the world attending fashion shows, a team of buyers picking the ranges and a team of technologists to make sure the garments are correct in terms of style and material.

"We have been focused over the last five years on constantly rejuvenating the fashion offering and not competing with the 20-year-old market, but making sure our core customer feels she is dressed fashionably, beautifully and appropriately."

This focus on fashion on top of a core range of clothes has worked for Woolworths; lately the group has been growing its market share.

Underpinning all of this, as with it food division, is Woolworths' stamp, its differentiator, its marketing strategy: quality.

Not an easy task to manage, as Woolworths has discovered, especially when it is making the food brands more accessible to newer markets, for instance with its iSential shops, and when it is developing 1 000 new or improved products each year.

"We have fairly high levels of trust but we constantly have to earn it."

The food division produced roughly half of Woolworths' turnover of R9 billion in 2003, although the clothing division does enjoy better margins.

The food division has also undergone a major rejig, mostly in the provision of branded goods.

Susman says this came about because customers had started to complain that they could do only part of their shopping at a Woolworths store. To tackle this problem, Woolworths introduced what Susman calls the five Ks:
"Kellogg's, Coke, coffee, cleaning and chocolate."

Because these goods have such powerful brands, he says, it was difficult for Woolworths brands to compete.

What Susman would like to do now is to get more of the food customers buying clothes.

"The food division has a slightly higher-income profile. The strategy is to try to get more food customers to buy clothes," said Susman.

Whether it will be successful is harder to tell. It is a strategy that has been tried before by the group, without much success.

But innovation is a big part of Woolworths' life. "There is always innovation going on," Susman says.

This innovation has brought about not only the launch of new foods but the extension of Woolworths offerings into new markets, as with the iSential brand and a partnership with Engen to set up Woolworths convenience shops at petrol stations.

It offers financial service products such as unit trusts and is in the pilot phase of testing Visa cards that will offer loyalty rewards and points that can be traded for discounts on Woolworths products.

"We are really passionate about the brand," is Susman's view on expanding into new areas.

Of course, it is not all roses.

Both the children's wear and home offerings divisions have been experiencing problems.

Yet, depending how you view this, it is either an opportunity or something to be wary of.

Woolworths' ambition is not to be the country's number one retailer in terms of size but rather to outperform its peers.

On this matter, though, the market is slightly divided, with analysts'
recommendations spread evenly between buys, sells and holds.

The biggest concern tends to be about whether Woolworths will remain in the JSE Securities Exchange's Top40 index.

Right now it's hovering at the bottom end. If it does fall out, it could be in for some price weakness.

Susman will no doubt argue that his job is to get the fundamentals right and for the market to deal with the share price. - Max Gebhardt