Countdown first-half earnings fall as loyalty, quake costs mount

The supermarkets' own food price index showed deflation of 0.2% over the half.

The Countdown supermarket chain posted a 4.5% 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 January 1 from $170.6 million in the previous year, its ASX-listed parent company Woolworths announced. Sales were $3.23 billion against $3.18 billion in the previous corresponding period, up 1.6%. According to the company, sales in the previous year benefited from the bulk sales of gift cards. Excluding the sales of these cards, sales growth was 2.8%, it said.

The supermarkets' own food price index showed deflation of 0.2% 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 metre declined by 0.4%, with the reported sales more than offset by an increase in average trading space of 2.9% despite the closure of one net store during the half year, it said.

Woolworths reported total group earnings before interest and tax of $A1.26 billion, up 170% on the year and a net profit of $A725.3 million, up 175%. A year ago, however, it reported its first loss in 23 years after taking $A1.9 billion in writedowns on the Masters home improvement business. Net profit from continuing operations was down 17% at $A785.7 million and it cut its dividend to 34Ac a share from 44Ac n the same period a year earlier.

The ASX-listed shares last traded at $A25.50, up 10.8% in the past 12 months.