Woolworths Holdings has warned that it expects Country Road’s earnings to drop 20% compared to FY23.
👉 Background: Country Road is the fashion retailer that was founded back in 1974. By 2014, it was wholly owned by a South African retailer, Woolworths Holdings Limited, who also own other Aussie brands like Mimco, Trentery, Politix and Witchery.
👉 What happened: Now, Woolworths Holdings (no relation to Woolworths in Australia) has warned that it expects Country Road’s earnings to drop 20% compared to FY23.
👉 What else: It believes Country Road is facing a double whammy. On the one side, there’s the pressure of higher living costs, meaning less demand from customers. On the other side, Country Road is struggling due to higher import costs.
💡When a company purchases its raw materials from another country, it is beholden to fluctuations in exchange rates.
💡If the Australian dollar is stronger against that country's currency, each Aussie dollar can buy more and the cost of importing goods becomes cheaper. But, when the Australian dollar becomes weaker, the cost of those imported goods goes up significantly.
💡 Get this, the Australian dollar has dropped over 13% compared to the US dollar in the last 24 months. And because of the weaker Aussie dollar, Country Road’s expenses have jumped significantly.
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