Woolworths NZ results: Higher wage costs weigh on earnings

“Lower sales, combined with our investments in lower prices for our customers and material labor costs to support our team, all impacted F24’s results,” Sonn said.

Wage costs have increased by 19 percent in the past two years.

The company’s gross profit margin decreased 58 basis points to $22.5 million.

Woolworths NZ attributed the margin decline to investments in value and the rebalancing of pricing mechanics, although higher freight costs and the launch of the Everyday Rewards program also contributed.

Supermarket sales increased 2.2% year-on-year and e-commerce sales increased 7.2% year-on-year.

The Woolworths NZ Group owns local retailers nationwide, including 188 Woolworths supermarkets, 19 SuperValue and 55 FreshChoice franchise stores.

Three new FreshChoice stores and the conversion of 16 SuperValue stores to FreshChoice contributed to a 5.3% increase in franchise and other revenue.

Sonn said he was proud of the company’s multi-year transformation program, which includes rebranding 72 supermarkets from Countdown to Woolworths, with another 60 planned for 2025.

Several e-commerce initiatives were launched or developed during the year, including the Milkrun grocery delivery app for 57 stores and the Direct-to-boot pick-up service, which is now available for 43 stores.

The launch of the Everyday Rewards (formerly OneCard) loyalty program was very popular, recording 1.6 million active members and a 60% transaction scan rate in the fourth quarter.

In response to ongoing retail crime, the company also introduced new security measures, including the introduction of security cameras for the team, shopping cart locking systems, push-to-talk radios and the removal of knives from shelves.

Woolworths NZ has also opened its new Christchurch Fresh distribution centre, which is expected to bring significant improvements to the supermarket’s South Island network.

Customer metrics have improved in key areas, particularly value for money, fresh fruit and vegetables and better shelf availability.

“Our priority remains to create value for our customers and we know we need to do more to help them find value throughout their store,” said Sonn.

Woolworths Group continues to be successful

The enlarged Woolworths Group, including its Australian operations, reported revenues up 5.6% to A$67.9 billion (US$73.8 billion).

Group EBIT before significant items increased 3.4% to A$3.2 billion ($3.4 billion) in FY24, with higher EBIT expected for FY25 due to stronger growth in the second half of the year.

Net profit after tax (Npat) before significant items for the group fell 0.7% to A$1.72 billion ($1.86 billion) in the 2024 financial year. After significant items, it was A$108 million. The company said the A$1.6 billion of significant items were primarily due to a previously announced impairment at New Zealand Food and a mark-to-market loss at Endeavour Group.

The impairment in New Zealand of $1.613 billion was an impairment of goodwill within intangible assets. In addition, there was an impairment charge of $14 million related to property, plant and equipment and working capital as a result of the rebranding of Countdown to Woolworths.

Woolworths Group chairman Scott Perkins said the results reflected the difficult operating environment, noting that inflation and the cost of living crisis continued to put pressure on customers.

“We expect the economic environment in the F25 to remain challenging and will continue to work hard to meet our customers’ expectations, provide them with good value for money and provide them with a better shopping experience,” said Perkins.

Outgoing CEO Brad Banducci said it had been a challenging year for BIG W and New Zealand Food as they continued their transformation plans.

He also reflected on his time at the helm of the company and expressed his gratitude for “the privilege of a lifetime” as he passed the baton to incoming CEO Amanda Bardwell.

“I couldn’t be prouder to pass the baton to Amanda Bardwell and our extended leadership team. Amanda will be the 13th CEO of Woolworths Group and I am confident she will lead us brilliantly for the next 100 years,” said Banducci.

New Zealand’s food sector is highly concentrated and dominated by two players: Foodstuffs and Woolworths NZ. A controversial merger proposal between Foodstuffs North Island and Foodstuffs South Island is currently before the Commerce Commission.

The sector is worth more than $25 billion annually, and Foodstuffs is the largest single player together. Foodstuffs and Woolworths together control 80 to 90 percent of the market.

In March 2022, the Commission published the results of a market study in this sector. It said that competition was weak and prices appeared unusually high by international standards.

The previous government introduced a series of reforms in 2022 and 2023, including the establishment of a Food Commissioner to oversee competition, mandatory wholesale supply of goods to supermarkets and a code of conduct that supermarkets must follow when dealing with suppliers.