Countdown says NZ operating profit has fallen and competition ‘robust’

Countdown owner says year just closed was undoubtedly one of the most challenging for its business in recent memory.

Chris McKeen / Stuff

Countdown owner says year just closed was undoubtedly one of the most challenging for its business in recent memory.

Countdown owner Woolworth NZ says its operating profit fell 12.5% ​​to $ 316 million in the year to June 26.

That is despite the Government’s concerns about the profitability of the supermarket sector and consumer concerns over rising food prices.

The company said its sales rose by 5.8% to $ 7.6b, but its earnings before interest charges and tax (Ebit) were down by $ 45m, from $ 361m the previous year.

Its net profit after tax amounted to 1.8% of each dollar spent in its stores, it said.

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Confirmation has been sought from the company that its net profit also fell, year on year, in line with its drop in Ebit.

Consumer NZ, which is among groups that have expressed concerns over the level of competition in the industry, was preparing comment.

The Commerce Commission used different metrics to assess the profitability of the supermarket industry earlier this year.

It concluded that Woolworths NZ and Foodstuffs were between them making “excess returns” over their cost of capital of about $ 430ma year and that their prices appeared “relatively high by international standards”.

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But Woolworths NZ managing director Spencer Sonn said the financial year just closed was “undoubtedly one of the most challenging” for its business in recent memory.

The company is ultimately owned by Woolworths in Australia.

Rises in the prices it paid suppliers for dairy products and “key imported food lines” were a common theme across the year, Woolworths NZ said in a statement.

The price the supermarket firm paid for butter and margarine rose 11%, cheese was up 15% and frozen fruit up 30%, it said.

The cost of sourcing toilet rolls and tissues rose 24% and price at which it could buy pet food was up 9% and flour costs up 19%, it said.

“When we look ahead to the next financial year, the outlook is still very challenging,” Sonn said.

“We know that our customers are facing higher cost-of-living pressures from all parts of the economy, not just groceries, and likewise New Zealand suppliers, and growers and farmers in particular, are feeling the impact of unpredictable weather, higher input costs and labor shortages, ”he said.

But Sonn said price competition “across the retail food sector” was robust and it remained committed to delivering the best value possible.

“We’re deeply committed to all our communities across New Zealand … and we also want to do the right thing for our team in terms of increased wages,” he said.

The company’s trading statement – which flowed from the annual results reported by its parent in Australia – come a day after the Government ratcheted up pressure on Countdown and Woolworths to deliver better value by announcing it would press ahead with a “wholesale backstop”.

Prime Minister Jacinda Ardern said that would ensure their “stockroom doors” were opened up to rival retailers.