Woolworths is redirecting investment to the division that delivers, and it published the returns to justify it
Woolworths is reorienting around its South African food business, which will take a materially larger share of investment over the next three to five years. That division produces about 70 percent of group operating profit at roughly 37 percent return on capital, and its grocery delivery service grew revenue by almost 20 percent. Capital allocation has moved from divisional plans built upward to a top down comparison of returns by geography and category.
- 70% Of Group Operating Profit
- 37% Return On Capital Employed
- 20% Grocery Delivery Revenue Growth
Grocery delivery growing close to 20 percent inside a group whose overall profit fell is the whole signal. A capital allocation committee comparing a 37 percent return on capital against a discounting apparel division does not need persuading about where the next investment goes. The method changed too: allocation moved from divisional plans built upward to a top down comparison of returns by geography and category, so a proposal now has to survive a group level comparison. A supplier whose business case is expressed in return on capital rather than cost saving is speaking the language the decision is actually made in.