Woolworths lifts NZ supermarket earnings

Woolworths has lifted its New Zealand supermarket earnings as the Australian company continues to re-brand the outlets as Countdown stores. File photo

Woolworths lifted full-year earnings from its New Zealand supermarkets by 5.1 per cent 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 per cent 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 per cent. The shares dropped 5 per cent to A$25.86 on the ASX.

In New Zealand, the retailer is 88 per cent 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 per cent in the latest 52 week period, while its ebit margin was unchanged at 4.71 per cent.

The result was achieved "in challenging economic conditions," made worse by the Christchurch earthquake, the retailer said.

The February 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 per cent to $322 million in the latest year, but its ebit margin shrank 140 basis points to 1.74 per cent and ebit tumbled 48 per cent 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.