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Woolworths lifts NZ supermarket earnings by 5.1%

Woolworths lifts NZ supermarket earnings by 5.1%, claims biggest brand with Countdown

Aug. 25 (BusinessDesk) – Woolworths Ltd. lifted full-year earnings from its New Zealand supermarkets by 5.1% as sales rose and the Australian company continued to re-badge its outlets as Countdown stores, claiming the biggest kiwi retail brand by turnover.

Earnings before interest and tax rose to $244 million from $232 million a year earlier, the company said in a statement today. Sales rose 3.4% to $5.36 billion.

Woolworths, Australia’s biggest retailer, today posted annual net profit of A$2.1 billion, missing some estimates, and forecast 2012 profit would rise as much as 8%. The shares dropped 5% to A$25.86 on the ASX.

In New Zealand, the retailer is 88% through re-branding its supermarkets as the ‘value-positioned’ Countdown, in a challenge to the Foodstuffs’ no-frills Pak’nSave chain. The two groups dominate New Zealand’s supermarket sector, with the three Foodstuffs cooperatives being the biggest player with $8.1 billion of revenue, based on their latest published figures.

Woolworths said converting all its stores to the Countdown brand gives it the opportunity for enhanced marketing and promotions. Its gross margin in New Zealand widened 37 basis points to 22.64% in the latest 52 week period, while its ebit margin was unchanged at 4.71%.

The result was achieved “in challenging economic conditions,” made worse by the Christchurch earthquake, the retailer said. The Feb. 22 quake shuttered seven Countdown and franchise stores in the city, though since then four have re-opened.

Woolworths has 156 stores in New Zealand to Foodstuffs’ 680 outlets, which include supermarkets, convenience stores and liquor outlets.

Woolworths also owns the Dick Smith chain in New Zealand and Australia. In New Zealand, consumer electronic sales fell 5.6% to $322 million in the latest year, but its ebit margin shrank 140 basis points to 1.74%and ebit tumbled 48% to $5.6 million.

The business “continues to be challenged with the weak economic environment impacting discretionary retailers together with strong price competition and significant price deflation, the company said.


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