Woolworths New Zealand topped $8 billion in food sales during its 2024 financial year but its profits slumped 56%, which the grocery giant attributes to a competitive trading environment and cost of living pressures reducing customer spending.
Woolworths NZ is the local arm of Woolworths Australia and was previously known as Countdown in NZ until a name change back to Woolworths was announced in 2023.
The Woolworths group reported its June-year financial results on Wednesday with earnings before interest and taxes (EBIT) for Woolworths NZ coming to $108 million — down 56.5% from a $249 million EBIT in the 2023 June-year.
EBIT measures a company’s profitability before accounting for interest and taxes.
Woolworths New Zealand Managing Director Spencer Sonn described it as a “challenging year” for the grocer and its overall financial performance reflected “the very competitive trading environment” Woolworths NZ is operating in as well as material wage costs.
“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. Encouragingly, we saw improved trading in Q4 with items returning to growth,” Sonn said.
“We are seeing signs of inflation moderating which will be a relief to our customers, with many fresh products cheaper now than they were this time last year, and we’ll continue to monitor our costs while delivering meaningful value to Kiwi shoppers.”
The cost of groceries have risen alongside cost-of-living pressures and Stats NZ reported in August that food prices increased 0.6% in the year to July 2024.
NZ food sales up 3.2%
Total New Zealand food sales rose 3.2% to $8.16 billion while Woolworths NZ’s gross margin fell 58 basis points to 22.5% in the full-year period.
The company said in its group results on the Australian share market that the decline in gross margin was primarily driven by investment in value and the reset of pricing mechanics in an extremely competitive market.
“While higher freight costs and the Everyday Rewards program launch also contributed to the reduction in gross margin, this was partially offset by an improvement in stock loss and cycling a collectible program in the prior year,” the company said.
Ecommerce sales for Woolworths NZ rose 5% to $1.07 billion. The company said sales momentum had improved in the second half of the 2024 financial year.
“As part of Woolworths New Zealand’s transformation, investment in convenient same day delivery propositions including Express pick up and delivery and MILKRUN is supporting strong growth with MILKRUN now available in 57 stores and Direct to Boot in 43 stores” the company said.
Looking ahead, outgoing Group Chief Executive Brad Banducci said in the group’s results that NZ food sales had increased by approximately 1.5% in the first eight weeks of the 2025 financial year.
“For full-year 2025, we expect EBIT to be above full-year 2024 with stronger growth in the second-half, but it will take time for the business to return to its full earnings potential,” he said.
In Australia, Woolworths is the country’s biggest supermarket chain and owns over a third of the grocery market.
In NZ, Woolworths makes up half of NZ’s supermarket duopoly which it shares with Foodstuffs South Island (FSSI) and Foodstuffs North Island (FSNI).
The two Foodstuffs co-ops have also reported their 2024 financial results, with FSSI revealing a net loss after tax of $11.5 million and FSNI a net loss after tax of $3.2 million. Both co-ops reported record revenue.
Looking ahead, outgoing Group Chief Executive Brad Banducci said in the group’s results that NZ food sales had increased by approximately 1.5% in the first 8 eight weeks of the 2025 financial year.
“For F25, we expect [NZ] EBIT to be above F24 with stronger growth in H2, but it will take time for the business to return to its full earnings potential,” he said.
Banducci is leaving Woolworths in September. He quit his role earlier this year following a controversial interview walkout around supermarket pricing.
The Woolworths group’s EBIT for the June-2024 year rose 3.4% to A$3.2 billion (NZ$3.4 billion) which was up from A$3.1 billion (NZ$3.3 billion) in the previous financial period.
The group announced a special dividend of A$489 million or 40 Australian cents per share from the sale of a 5% stake in retail firm Endeavour Group. The dividend will release A$209 million of franking credits.
16 Comments
Nice puff piece, did you copy that from their news and media release?
Here's something an AI produced in 0.07 seconds that has more interesting content and relevance to the current state of the duopolistic structure present in the FMCG sector here in New Zealand.
Supermarket groups like Woolworths NZ often operate under complex corporate structures, which can include multiple subsidiaries, joint ventures, and various accounting practices that might obscure the true profitability of the overall business. While this doesn't necessarily mean that profits are being "hidden," certain practices or structures can make it difficult to get a clear picture of the full financial performance. Here are some ways this could happen:
1. Transfer Pricing
- What It Is: Transfer pricing involves setting the price for goods and services sold between entities within the same group. For example, if Woolworths NZ purchases goods from another subsidiary within the Woolworths Group, the price set for these goods can impact the profitability reported by Woolworths NZ.
- Impact: By setting transfer prices higher or lower, the group can shift profits between subsidiaries, potentially reducing the apparent profitability of the New Zealand operations while increasing profits elsewhere.
2. Intercompany Loans and Interest Payments
- What It Is: The group could structure intercompany loans where one part of the group lends money to another at a certain interest rate. The interest payments made by Woolworths NZ to another subsidiary could reduce its taxable income.
- Impact: High interest payments to related entities can reduce Woolworths NZ's reported profit, even though the group as a whole might still be highly profitable.
3. Revenue Recognition and Cost Allocation
- What It Is: The way the group recognizes revenue and allocates costs can affect the apparent profitability of each entity. For instance, costs for services provided by the parent company or another subsidiary might be charged to Woolworths NZ, reducing its profit.
- Impact: Allocating higher costs to Woolworths NZ can reduce its reported profits, even if those costs are shared across the group or might be artificially inflated.
4. Tax Planning and Deductions
- What It Is: The group might engage in tax planning strategies that legally minimize the tax burden in New Zealand. This could include leveraging tax deductions, losses carried forward, or using international tax treaties.
- Impact: Such strategies can reduce the taxable income reported in New Zealand, making the profits appear lower than they might be in reality.
5. Offshore Subsidiaries
- What It Is: Woolworths Group may have offshore subsidiaries in jurisdictions with favorable tax rates. Profits could be shifted to these subsidiaries through various mechanisms, such as royalties, management fees, or dividends.
- Impact: This can make the New Zealand operations appear less profitable while the group as a whole benefits from the lower-taxed profits offshore.
6. Consolidated Reporting
- What It Is: Large multinational groups often report financials on a consolidated basis, combining the results of all their subsidiaries. However, the individual performance of each subsidiary might be less transparent.
- Impact: The way the group reports its overall financial performance might mask the true profitability of the New Zealand operations.
Regulatory Oversight and Disclosure
While these strategies can make it difficult to get a clear picture of Woolworths NZ's profitability, they are subject to regulatory oversight. Tax authorities and financial regulators in New Zealand have measures in place to ensure that profits are fairly reported and taxed.
However, unless there is transparency in the financial statements and related-party transactions, it can be challenging for external observers to fully understand the profitability of specific entities within the group.
I find that being a certain brand shopper on just about everything, the real pain is not being able to get everything at the one supermarket. I still shop mainly at Woolworths despite the massive complete waste of money rebranding exercise because of location. Pak n Save is further away but I go there when key items are on special like Protein bars because they are very expensive and when they drop to $4 instead of $6 I buy boxes of them. Pak n Save is good for basics, but despite the size they do not sell some items I like, why ? too many isles filled with complete crap like sweets, soft drinks, biscuits and chips along with way too much alcohol. Probably half the store is filled with complete rubbish that's not even "Food".
I used to shop at Countdown due to convenience, being the closest supermarket to my home. Since the tasteless, expensive and unnecessary exercise to rebrand to Woolworths during a "cost of living crisis", I have not stepped foot inside a Countdown since.
My money now goes to New World or Pak N Save.
Not surprised, I went last night for the first time in ages.. they are completely disconnected from the consumer. There prices for almost every thing is more than it's competitors, I'm not sure how hard it would be for them to work it out, but I'm guessing they will keep losing market share if they don't start actually competing in price. They have silly specials like by 3 for $20.. or most items are rounded up to the nearest dollar.. maybe time for this aussi giant to respect their kiwi customers?
Grocery and Fuel Hacks...
Cheaper Groceries Hack via Near-Perfect Price and Availability Information
Plug for the Grocer App - grocer.nz
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Note it doesn't cover the independents, just the supermarkets.
I'm not associated with any of these apps, I just find them very useful.
Cheaper Fuel Hacks via Price Arbitrage and Fuel Cards
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Better living everyone
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