Countdown's earnings slip on record revenue

The Countdown supermarket chain slipped 3.7% in annual earnings due to a combination of food price deflation, competitive pressures and increased team-based performance payments as part of a customer service improvement programme.

Earnings before interest and tax fell to $313.9 million in year to June 26, from $326 million the previous year, its ASX-listed parent company Woolworths says.

When normalised for team performance-based bonuses, Countdown's ebit for the year was flat compared with the previous year.

Sales of $6.1 billion set a new record, up 3.8% on the previous year, and the chain opened a net seven new stores in New Zealand.

"Comparable sales increased 1.3% for the year as customers reacted positively to our lower prices and improved service and fresh food offer," Woolworths says.

"Sales per square metre declined by 0.9% with comparable sales growth more than offset by an increase in year-end trading space of 5.1%."

The supermarkets' own food price index showed deflation of 0.3% over the year, with lower prices across both categories.

Reduced use of fuel discount promotions helped improve gross margin to 23.58% from 23.5% the year before. There was a slight decline in return on funds employed, at 10.48% from 10.63% the previous year, despite a 5.7% fall in funds employed.

Countdown is now operating at 184 sites in New Zealand, having opened 10 new stores and closed three in the past year.

The result was the first ebit downturn for the New Zealand supermarkets segment in the past five years.

Expressed in Australian dollars, the New Zealand business returned operating earnings of $A224.5 million in the 2012 financial year, rising to $A303.2 million in 2015 before dropping back to $A284.4 million this year.

Woolworths' group results were heavily affected by the termination of its Australian home improvements business, repositioning of its BigW business and a drive to improve competitiveness in its Australian food business.

The company reported a statutory net loss for the year of $A1.23 billion, compared with a net profit after tax in the previous year of $A2.15 billion. Ebit from continuing operations also fell heavily, down 54.8 % to $A1.61 billion.

(BusinessDesk)

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