Woolworths' NZ supermarkets lift annual operating profit 17.7%
Aug. 24 (BusinessDesk) - Australia’s Woolworths said its New Zealand supermarkets lifted annual operating earnings 17.7 percent by growing market share, selling more to the same customers and reducing ‘shrinkage’.
The New Zealand supermarkets earnings before interest and tax (ebit) for the year ended June 30 rose to $287.4 million from $244.1 million the previous year as sales rose 3 percent to $5.52 billion.
Ebit profit margin rose 59 basis points to 5.3%, “a very pleasing result given the supermarket industry has been relatively static over the last 12 months and inflation has been low,” the company said.
“The result is underpinned by the shift to the single Countdown brand which has seen great momentum build across the business with growth in market share, customer numbers, basket size and items sold,” it said.
Customers continue to respond well to the price positioning and the delivery of value provided by Countdown stores.”
Gross margin improved by 63 basis points, reflecting reduced shrinkage, continued merchandise reviews, more effective promotional planning and the conversion from direct store deliveries to distribution centre deliveries, the company said.
Woolworths opened seven new Countdown stores during the year and reopened a quake-damaged store in Christchurch, taking total store numbers to 161. The company aims to open three to five new stores a year.
It said 73 percent of all Countdown stores have been converted to new formats and extensions and refurbishments continue.
Online sales growth was strong and downloads of the Countdown smartphone app launched during the year totalled more than 140,000.
The company is also growing its FreshChoice and SuperValue franchise networks, opening two FreshChoice stores in Auckland and one SuperValue store in Edgeware, Christchurch.
Woolworths is in the process of restructuring and divesting its Dick Smith’s consumer electronics stores and it said it closed 52 underperforming stores during the year in both Australia and New Zealand and a further 22 stores closed in July. It now has 62 New Zealand stores.
Nevertheless, Dick Smith's New Zealand sales rose 2.8 percent to $331 million during the year. Sales through stores open 12 months or more were up 6.9 percent, reflecting a strong promotional program, stock clearances and store closures, it said.
Woolworths' overall A$1.12 billion net profit for the year, down 14.5 percent, included a pretax A$420 million restructuring provision for Dick Smith's.
On the ASX, Woolworths shares fell as much as 98cents to A$28.51, down from yesterday's 12-month high at A$29.61. The shares have risen from as low as A$23.21in November.