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Countdown 1H earnings fall as loyalty, quake costs mount

Wednesday 22nd February 2017

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The Countdown supermarket chain posted a 4.5 percent drop in first-half earnings due to a strategy of investing in team hours, costs of a new loyalty alliance with AA Smartfuel and uninsured losses related to the November earthquake.

Earnings before interest and tax fell to $163 million in the 27 weeks to Jan. 1 from $170.6 million in the previous year, its ASX-listed parent company Woolworths announced. Sales were $3.23 billion versus $3.18 billion in the prior corresponding period, up 1.6 percent.  According to the company, sales in the prior year benefited from the bulk sales of gift cards. Excluding the sales of these cards, sales growth was 2.8 percent, it said. 

The supermarkets' own food price index showed deflation of 0.2 percent over the half, driven by lower prices in grocery, and reduced inflation in seasonal fruit and vegetables. It said the cost of doing business or CODB increased 62 basis points reflecting the investment in team hours, the cost of the new loyalty alliance and the impact of the November earthquake. 

Sales per square meter declined by 0.4 percent with the reported sales more than offset by an increase in average trading space of 2.9 percent despite the closure of one net store during the half year, it said.

Woolworths reported total group earnings before interest and tax of A$1.26 billion, up 170 percent on the year and a net profit of A$725.3 million, up 175 percent. A year ago, however, it reported its first loss in 23 years after taking A$1.9 billion in write-downs on the Masters home improvement business. Net profit from continuing operations was down 17 percent at A$785.7 million and it cut its dividend to 34 Australian cents a share from 44 Australian cents in the same period a year earlier. 

The ASX-listed shares last traded at A$25.50, up 10.8 percent in the past 12 months.  

BusinessDesk.co.nz

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