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Countdown sees faster price deflation in 4th qtr; online shopping boosts FY sales

Monday 20th August 2018

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Woolworths Group's Countdown chain of supermarkets in New Zealand says grocery prices fell at an even faster pace in the fourth quarter, although growing demand for online sales helped boost annual revenue. 

New Zealand food sales rose to $6.4 billion in the 52 weeks ended June 24, from $6.2 billion a year earlier, though earnings before interest and tax (ebit) dropped 8.2 percent to $284 million, according to Sydney-based Woolworths' annual sales statement. The decline in earnings was due to increased staff costs, even as New Zealand headcount shrank to 18,430 from 19,228 a year earlier, and increased spending on its 'CountdownX' digital unit. 

Countdown, along with SuperValue and FreshChoice, competes with Foodstuffs in New Zealand, a retail group comprised of two cooperatives that operates the Pak'nSave, New World and Four Square chains. The brand's local holding company, Woolworths New Zealand, changed its name from Progressive Enterprises at the end of June. 

The retailer said New Zealand deflation accelerated in the fourth quarter, with a 1.8 percent decline in average prices "largely driven by lower fruit & vegetable and grocery prices." Still, its gross margin was unchanged at 24.2 percent.

According to figures from Statistics New Zealand, grocery prices increased 2.1 percent in the year to June 30, while fruit and vegetable prices rose 9.3 percent. The Stats NZ food price index collects prices from 650 outlets in urban areas each month, including supermarkets, greengrocers, convenience stores, fishmongers and butchers, as well as restaurants and other food outlets.

Online shopping was a bigger feature for Countdown in 2018. It said online sales grew over 30 percent across Australia and New Zealand. In June, the company launched CountdownX - modelled on the parent company's digital business WooliesX - which collects data, offers customer rewards and operates e-commerce.

"Despite the online presence of competitors expanding, Countdown's online and pick up service continues to see significant growth, helped by increased shopping windows, longer Sunday hours and Countdown's pick up app for customers," the annual report said. "Countdown's expanded delivery capacity, reduced delivery fees and the launch of free pick up for orders over $50 has also supported an acceleration in online sales growth for the year."

The company said it would continue to invest in CountdownX in 2019.

For the parent Woolworths, group sales from continuing operations rose 3.4 percent to A$56.7 billion and ebit jumped 9.5 percent to A$2.5 billion.

The board declared a final dividend of 50 Australian cents per share, the same as 2017, although it also declared a 10 Australian cents per share special dividend. That lifts the annual dividend to A$1.03 for the year, from 84 Australian cents a year earlier.

Woolworths stock last traded at A$29.60 on the ASX and has gained 8.4 percent this year.


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