Woolworths NZ has had a small growth in its sales, but its overall performance has taken a big hit.
Woolworths NZ has had a small growth in its sales, but its overall performance has taken a big hit.
Woolworths New Zealand has reported a slight rise in sales but its earnings before interest and tax more than halved on the back of a tough economic environment and higher staffing costs.
Total food sales for the NZ business grew to $8.1 billion, up 3.2% compared to FY23.
Wage costsoutpaced sales growth, leading to normalised earnings before interest and tax (ebit) falling 57.2% to $108 million, compared to $249m in FY23.
Earnings before interest, tax, depreciation and amorisation (ebitda) also dropped, down 21.4% for FY24 to $449m compared to $572m in FY23.
Woolworths New Zealand managing director Spencer Sonn said the result reflected the tougher trading environment the business is operating within because of the cost-of-living pressures still facing consumers.
“Lower sales, combined with our investments in lower prices for our customers and material wage costs to support our team, all had an impact on earnings in F24,” Sonn said.
Wage costs had increased by 19% over the past two years.
The business’s gross profit margin fell 58 bps to $22.5m.
Woolworths NZ attributed the margin drop to investment in value and the reset of pricing mechanics, although higher freight costs and the launch of its Everyday Rewards programme contributed.
Supermarket sales were up 2.2% year-on-year and e-commerce sales were up 7.2% YoY.
Woolworths NZ Group owns local retailers nationwide, including 188 Woolworths supermarkets, 19 SuperValue, and 55 FreshChoice franchise stores.
Three new FreshChoice stores and the conversion of 16 SuperValue stores to FreshChoice contributed to an increase in franchise and other revenue by 5.3%.
Woolworth's managing director Spencer Sonn.
Sonn said he was proud of the business’ multi-year transformation agenda, including the 72 supermarkets that rebranded from Countdown to Woolworths, and another 60 planned for 2025.
Several e-commerce initiatives were launched or evolved during the year, including grocery delivery app Milkrun for 57 stores and the Direct-to-boot pick-up service now available for 43 stores.
Launching its Everyday Rewards loyalty scheme (formerly OneCard) had proven popular, with 1.6 million active members and a scan rate of 60% on transactions in the fourth quarter.
The business also introduced new safety measures including the rollout of team safety cameras, trolley lock systems, push-to-talk radios, and removing knives from shelves in reaction to ongoing retail crime.
Woolworths NZ also opened its new distribution centre, Christchurch Fresh, expected to deliver material improvements for the supermarket’s South Island network.
Customer metrics in key areas saw improvements, particularly in value for money, fresh fruit and vegetables, and better shelf availability.
“Delivering value for our customers continues to be our priority and we know they need us to do more to help them find value across their whole shop,” Sonn said.
Woolworths Group still performing
The wider Woolworths Group including its Australian businesses reported a 5.6% growth in sales to A$67.9 billion ($73.8b).
The group’s ebit before significant items grew by 3.4% in FY24 to A$3.2b ($3.4b ), with FY25 ebit expected to be above thanks to stronger growth in its second half.
Net profit after tax (Npat) before significant items for the group fell by 0.7% to A$1.72b ($1.86b ) for FY24. After significant items it was A$108m. The company said the A$1.6b in significant items primarily related to a previously disclosed New Zealand Food impairment and mark-to-market loss on Endeavour Group.
The $1.613b New Zealand impairment was a write-down in goodwill within intangible assets and on top of that it had a $14m impairment loss relating to property plant and equipment as a result of rebranding from Countdown to Woolworths.
Woolworths Group chair Scott Perkins said the results reflected the challenging operating environment, pointing to inflation and the cost-of-living crisis as ongoing pressures for customers.
“We expect the economic environment to continue to be challenging in F25 and we will continue to work hard to meet our customer expectations to find great value and deliver better shopping experiences,” Perkins said.
Outgoing CEO Brad Banducci said it was a challenging year for BIG W and New Zealand Food as they continue their transformation plans.
He also reflected on his time in charge, expressing his gratitude for “the privilege of a lifetime” as he passes the torch to the incoming CEO-elect Amanda Bardwell.
“I couldn’t be prouder to hand the baton over to Amanda Bardwell and our extended group leadership team. Amanda will become the 13th CEO of Woolworths Group and I know she will do a great job of leading us into the next 100 years,” Banducci said.
New Zealand’s grocery sector is highly concentrated, and dominated by two players: Foodstuffs and Woolworths NZ. A contentious merger proposal of Foodstuffs North Island and Foodstuffs South Island is currently before the Commerce Commission.
The sector is worth more than $25b a year, and, taken together, Foodstuffs is the single-largest player. Foodstuffs and Woolworths together control 80% to 90% of the market.
In March 2022, the commission published the results of a market study into the sector that found competition was anaemic and that prices appeared to be anomalously high in an international comparison.
The previous Government introduced a range of reforms in 2022 and 2023, including the establishment of a grocery commissioner to oversee competition, the mandated wholesale supply of goods by the supermarkets, and a code of conduct that supermarkets are obliged to follow in their dealings with suppliers.
