Countdown 2017 profit falls on more expensive dairy, earthquake costs

The supermarkets' own food price index showed deflation of 0.4% over the year.

Woolworths' Countdown supermarket chain in New Zealand had a 1.4 percent decline in annual profit despite margins rising, with dairy and fresh produce costing more along with uninsured losses related to the November 2016 earthquake.

Earnings before interest and tax fell to $309 million in the year to June 30, from $313.9 million in the previous year, its ASX-listed parent company Woolworths announced. Sales were $6.23 billion versus $6.1 billion in the prior corresponding period, up 2.1 percent. According to the company, sales in the prior year benefited from the bulk sales of gift cards. Excluding the sales of these cards, annual sales growth was 2.8 percent, it said.

The supermarkets' own food price index showed deflation of 0.4 percent over the year, driven a return to inflation in dairy and price fluctuations for fresh fruit and vegetables. It said the cost of doing business or CODB increased 60 basis points because of staff expenses and logistics costs from the Kaikoura earthquake

Countdown lifted gross margin 42 basis points to 24 percent, which it said was due to reduced stock loss through store security and ranging initiatives, changes in fuel discount promotions and fewer low-margin bulk gift card sales. The company said its online business had "double digit" growth in 2017.

Woolworths reported total group earnings before interest and tax of A$2.64 billion, from a $1.67 billion loss in 2016, and a net profit of A$1.53 billion, up 224 percent. Last year it reported its first loss in 23 years after taking A$1.9 billion in write-downs on the Masters home improvement business. It declared a 50 Australian cent final dividend, pushing the annual dividend payout to 84 Australian cents, up 9.1 percent from 2016.

The ASX-listed shares last traded at A$27.06, up 12.3 percent this year.

(BusinessDesk)