Woolworths Holdings Ltd. reported sharp slowdown in its Australian apparel business due to a highly promotional market. The Cape Town-based company simultaneously increased investment in its South African food division, which accounts for 64% of total revenue. CEO Roy Bagattini explained Australian retailers face excessive discounting and inventory buildup in discretionary categories as consumers wait for sales rather than paying full price.

Margin pressures mounted as Woolworths invested in a new food-distribution center in South Africa while clearing excess inventory and lowering children's clothing prices. Net income fell 33% to 1.48 billion rand ($90 million). These strategic moves aimed to position the company better in both markets despite near-term profitability challenges and increased promotional activity.

The retailer found success with its discounted children's clothing line, with the winter range trading 28% higher. Bagattini highlighted significant cross-shopping opportunities between kids apparel and food customers. Woolworths shares dropped 8.6% this year, underperforming the broader South African retailers' index which lost 4.5% over the same period, reflecting investor concerns about the company's strategic direction.