Woolworths Australia chief executive Michael Luscombe says he is relaxed about the company's New Zealand earnings and says Progressive Enterprises will eventually match results across the Tasman.
In its full-year result last week Woolworths said its subsidiary Progressive made earnings before interest and tax of A$155.1 million ($180.9million). Luscombe said the company was still not returning the cost of the A$2.5 billion capital Woolworths has applied to the purchase.
But he said bald figures for the first full 12 months of owning Progressive "don't show substantial benefits" the acquisition had on the bottom line for Australian supermarkets.
These included 20 Foodland supermarkets in Australia, development sites and benefits from the improved supply chain.
He could not estimate the value but said there was a direct benefit from the 20 Australian-based supermarkets bought under the deal.
"We have a three year programme to bring New Zealand up to speed. This first year we invested heavily in price at our New Zealand supermarkets and had some success.
"In the longer term the return from New Zealand should approach what we achieve in Australia," he said.
The New Zealand supermarket sector is a duopoly with 44 per cent market share held by Progressive - with Countdown, Foodtown and Woolworths stores - and 56 per cent by cooperative Foodstuffs with Pak n Save, New World and Four Square stores.
But the sector has faced upheavals with both Woolworths and Foodstuffs looking at a takeover of the Warehouse Group whose big format outlets would ensure market dominance, leadingthe Commerce Commission to rule them out.
Luscombe insisted Woolworths had narrowed the price gap with Foodstuffs which he acknowledged in applications for Commerce Commission clearance to buy the Warehouse.
"We take the long term view. One month you feel you have won the lottery and another month you feel like you should slash your wrists - that is retail business."
Macquarie Equities New Zealand investment manager Arthur Lim said he detected signs that cross-Tasman scale for Woolworths was starting to deliver benefits.
Meanwhile, Luscombe declined to comment on prospects for the High Court appeal of the Commerce Commission decisions that prevent Woolworths and Foodstuffs buying The Warehouse.
