The Woolworths Group is experiencing unrivalled growth in its beauty division, which it expects to continue over the next three years to make it the dominant beauty retail business in South Africa.
Woolworths Group CEO Roy Bagattini told Business Times the beauty business — which sells cosmetics and other beauty products — was enjoying growth levels averaging 20% a year, and that the trend was expected to continue.
“Our beauty business has more than doubled in the last three to four years. We plan to double it again in the next three to four years, if not sooner. We have increasingly become a destination for shopping for beauty products,” he said.
“Certainly, our bigger stores ... have a much stronger fully-fledged beauty offering, and we are creating a beauty concept that really pulls it all together. But increasingly, our beauty business is growing at 20% a year. It has been for the last couple of years.”
The group opened its first beauty standalone store in Waterstone Village to test the concept and opened a manufacturing plant in Cape Town for the group’s W Beauty products, which Bagattini said was the fastest-growing beauty brand in the country and the group’s fastest-growing brand.
“[W Beauty] is essentially a lot of the same stuff that you find in the branded beauty products. As we got more serious about the opportunity of beauty, we’ve reset our partnership with all of the major brands.”
The more that ratio shifts in favour of our brand, the more profitable overall beauty becomes for us on that basis, because the margins on our local brand are significantly higher. But we’re not uncomfortable with where that is. If you’re going to become the shopping destination for beauty products, you really need to have their offering.
While 30% of the products available are W Beauty products with 70% being established beauty brands, the group was not in a hurry to expand its own presence on the shelves, said Bagattini.
“The more that ratio shifts in favour of our brand, the more profitable overall beauty becomes for us on that basis, because the margins on our local brand are significantly higher. But we’re not uncomfortable with where that is. If you’re going to become the shopping destination for beauty products, you really need to have their offering.”
Woolworths Beauty GM Julie Maggs told Business Times last year it was investigating adding nail and skin treatment at its existing beauty sections.
Bagattini said the company was now very different to what it was a few years ago, when the clothing division had lost its way and it faced a debt crisis created by the acquisition of Australian clothing company David Jones. “We found ourselves in a pretty tough spot as a company ... We had a food business, which is really our engine room, that was still going quite well, but there were a lot of questions about the potential for that business.”
He said in the FBH (fashion, beauty and home) unit of the business, fashion provided 85% of its revenue, but beauty was growing aggressively. “Beauty inherently has a lower margin because you are selling a lot of other people’s brands, and particularly the international brands, or the elite brands, or the prestige brands, you don’t make much money from a margin percentage perspective.”
According to the company’s 2024 integrated annual report, the FBH divisions accounted for 40% of earnings before interest and taxes.
Woolworths chair Hubert Brody said the food business delivered strong growth, while FBH continued progressing despite the weak macroeconomic environment. “For the second year in a row, Australian interest rates remained prohibitive as a result of record high inflation. The Country Road Group battled in this environment of low consumer spending, and the effect of the economic downturn is evident through the operating leverage impact on our bottom line.”
Independent company analyst Simon Brown said food was an “absolute mainstay” for Woolworths over the years. He said after David Jones proved a “disaster” for the group and took management’s eyes off of local operations, beauty could be fertile ground for the business.
“I think beauty is always an attractive industry. There is a phenomenon called the lipstick effect. When times are tough a woman can buy a cheap lipstick and feel good about themselves. In beauty, you can go from cheap to prices that boggle our brains. It is a resilient industry.”
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