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Profit shock for Woolworths NZ business

Countdown supermarkets
(Source: Bigstock)

Woolworths New Zealand, trading as Countdown, experienced “a very challenging” third quarter and is on track for a profit decline of up to 28 per cent. 

Woolworths Group CEO Brad Banducci said the impact of Omicron, which was felt later in the quarter, led to supply-chain disruption and out of stocks that peaked in March.

While total sales increased by 3.8 per cent, average prices increased by 3.6 per cent. Online sales rose by 18.3 per cent.

The company expects the New Zealand food business to record a pre-tax profit in the range of NZ$120 – $140 million for the second half, which would represent a decline of 16-28 per cent on year. 

“The expected reduction in profit is largely a function of higher Covid costs associated with keeping our customers and team safe and minimising disruption to our supply chain.”

In a separate statement, Woolworths New Zealand MD, Spencer Sonn said that during the peak of the Omicron outbreak, nearly 3000 team members were away due to Covid – including nearly half of the staff of its major Auckland distribution centres. 

“We also experienced significant supply chain disruptions, and less availability of stock for our customers,” he said. 

“While sales were steady, our Covid-19-related costs increased significantly as we prioritised keeping our team and customers safe.”

Sonn said the company remained committed to investing in its New Zealand business, despite the decline in profit. Countdown plans to spend $1 billion to upgrade and build new stores across the network, strengthening its supply chain, and driving digital innovation.

“We’re continuing to work hard to deliver the best value that we can for our customers and keep prices as low as possible despite the current inflationary environment and record cost increases coming through from our suppliers as they too face higher input costs, including raw materials, packaging, freight and transportation.”

Group-wide, Woolworths posted a 9.7-per-cent increase in like-for-like sales during the third quarter to A$15.123 billion. 

In the company’s core Australian food business, sales rose by 5.4 per cent, however average prices rose by 2.7 per cent reflecting the “widespread industry cost pressures,” said Banducci.  

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