Listed retailer Woolworths said on Thursday that its middle and upper income customers had been hard hit as household debt burdens increased materially.

"Despite an optimistic early start to the year, trading conditions steadily worsened as higher interest rates and increases in fuel and food prices were felt by consumers," read a statement released as the group presented its results for the year ended 30 June.

The interest hike in September 2007 had a significant effect on consumer spending and the deterioration in consumer spend had continued to increase, Woolworths said.

Overall sales grew by 13.3 percent, reflecting the relative decline in disposable income in Woolworths' core customer base. Clothing and general merchandise sales grew by 6.1 percent.

Children's wear was the only category to show real improvement on the prior year.

Average clothing and general merchandise inflation for the year of 8.5 percent (down from 9.6 percent in the first half) demonstrated the heightened focus on value, especially at opening price points.

Slower food sales

Food sales gained 18.8 percent for the full year but showed slower growth in the second half of the year, as newly acquired middle-income food customers became "increasingly cautious" with their diminishing disposable income.

The company said its prices on more basic supermarket commodities had been sharpened and were now highly competitive.

"Inflation averaged 13.1 percent but is now coming off its highs."

Woolworths reported that turnover was up 15.5 percent and profit before tax, exceptional items and the BEE charge rose 6.2 percent.

Adjusted earnings per share rose by 4.3 percent while the total dividend per share increased to 79 cents.

Sapa