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Woolworths New Zealand has reported a dramatic 57.2% decline in earnings before tax, with the figure plummeting to NZ$108 million for the past fiscal year. This represents the lowest earnings before tax the supermarket has recorded in the last decade. The drop in profitability comes as the company undertakes a significant $40 million rebrand and navigates a challenging trading environment.
Managing Director Spencer Sonn attributed the reduced earnings to several factors, including a competitive market and heightened cost-of-living pressures affecting consumers. “Lower sales, combined with our investments in lower prices for our customers and material wage costs to support our team, all had an impact on earnings in F24,” Sonn said. Despite these difficulties, he noted a positive trend with improved trading in the fourth quarter, where sales began to recover.
For the fiscal year ending in June, Woolworths New Zealand saw a modest 1.3% increase in sales. However, wages have surged by 19% over the past two years, reflecting broader inflationary pressures and increasing operational costs. The company is currently negotiating with First Union regarding a pay rise for staff, with the living wage set to increase to NZ$27.80 on September 1.
Sonn emphasised Woolworths' commitment to delivering value to its customers. “Delivering value for our customers continues to be our priority and we know they need us to do more to help them find value across their whole shop,” he stated. The supermarket has 1.6 million active members on its Everyday Rewards scheme, indicating strong customer engagement.
In response to these financial challenges, Woolworths has adjusted its pricing strategies. “We also reset our key price mechanics, with more to do in F25,” Sonn added. This strategic shift aims to enhance customer satisfaction and improve sales performance.
As the company continues its rebranding efforts and adapts to the evolving market conditions, it remains focused on enhancing its value proposition and operational efficiency.
