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Woolworths CEO Targets Africa’s Middle Class to Drive Sales Growth

South African food and clothing retailer Woolworths Holdings Ltd. (WHL) expects to more than triple the proportion of sales it derives from other African countries within seven years as it taps a growing middle and upper class.

The rest of Africa isn’t currently “a huge part of our business,” Woolworths Chief Executive Officer Ian Moir said in an interview at the company’s Cape Town headquarters yesterday. “It’s about 3 percent now. It will get to 10 percent but not for five to seven years.”

Consumer spending in Africa rose at a compound rate of 16 percent between 2005 and 2008 and the continent has more families with an income exceeding $20,000 a year than India, New York-based McKinsey & Co. said a June 2010 report. Woolworths operated 57 stores in 12 African countries outside of its home market at the end of last year and plans to have between 80 and 104 within two years.

Two stores opened recently in Nigeria and one in Mauritius are performing well and four or five outlets will be operating in each country soon, while expansion into Angola is being explored, he said.

Woolworths’ net income surged to 1.03 billion rand ($125 million) in the six months ended December from 775 million rand a year earlier, as sales gained 11 percent to 14.2 billion rand. Conditions in South Africa were constrained and getting tougher, Moir said on Feb. 16 when the results were released.

Slowing Economy

The growth rate in Africa’s largest economy slowed to an annualized 2.7 percent in the first quarter of this year from 3.2 percent in the previous three months, according to government data. Expansion in the wholesale and retail industries eased to 3 percent from 5.2 percent.

“It hasn’t necessarily gotten any tougher for us,” Moir said yesterday. “The overall market is pretty much where it was in the first six months of the financial year. Our foods business continues to trade well,” while some problems in the clothing business have been resolved.

The company’s concerns about spiraling prices haven’t materialized, with food price inflation currently at around 8 percent and clothing inflation between 5 percent and 6 percent, he said.

Source: Businessweek.com

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