EBIT growth was subdued in New Zealand Food during FY17 as we invested in price and service to improve the offer for our customers. We will continue to invest in our customer offer in FY18 in line with our Customer 1st strategy.
TRADING PERFORMANCE
New Zealand Food’s sales for the year were NZ$6.2 billion, an increase of 2.1% on the previous year (5.3% increase in AUD). Sales in the first half last year were assisted by the bulk sales of gift cards and excluding the sales of these cards, full year sales growth was 2.8%. Easter adjusted sales in Q3’17 and Q4’17 were 2.2% and 3.4% respectively.
Comparable sales increased 1.2% for the year or 1.8% excluding bulk gift card sales. Comparable sales strengthened during the second half (HY17: 0% (1.1% gift card adjusted), H2’17: 2.5%) as customers continued to react positively to our price, service, fresh and local ranging activity, as well as the new partnership between our Onecard loyalty program and AA Smartfuel launched in Q2’17. This was consistent with our improving customer metrics over the course of the year. Sales per square metre was flat for the year, but moved into growth in the second half. Countdown ended the year with customer satisfaction and team engagement at new highs.
The Countdown Supermarkets Food Price Index increased by 0.4% driven by a combination of a return to inflation of dairy products and higher levels of inflation in fresh produce impacted by growing conditions and supply.
Gross margin increased 42 bps on the previous year due to reduced stock loss through store security and ranging initiatives, changes in fuel discount promotions and fewer low-margin bulk gift card sales.
CODB as a percentage of sales increased 60 bps on the previous year driven by investment in the store team to improve the customer experience, logistics costs (impacted by the Kaikoura earthquake), occupancy and team bonuses.
EBIT decreased 1.4% but was up marginally when normalised for team performance-based bonuses compared to the prior year.
ROFE was 21 bps higher than the prior year due to a reduction in average funds employed despite lower EBIT.
| BEFORE SIGNIFICANT ITEMS1 | FY17 52 weeks |
FY16 52 weeks |
Change | |
| Sales | (NZ$m) | 6,232 | 6,101 | 2.1% |
| EBIT | (NZ$m) | 309.4 | 313.9 | (1.4%) |
| Gross margin | (%) | 24.00 | 23.58 | 42 bps |
| Cost of doing business | (%) | 19.04 | 18.44 | 60 bps |
| EBIT to sales | (%) | 4.96 | 5.14 | (18) bps |
| Sales per square metre | (NZ$m) | 15,137 | 15,178* | (0.3%) |
| Funds employed | (NZ$m) | 2,934.50 | 2,906.40 | 1.0% |
| ROFE3 | (%) | 10.5 | 10.3 | 21 bps |
* Sales per square metre has been restated from prior year to be consistent with current Australian Food definition.
n.c. Not comparable
n.m. Not meaningful
- There were no significant items recognised in FY17.
In FY16, total significant items of $4,013.7 million before tax ($2,627.8 million after tax attributable to equity holders of the parent entity) were recognised. Details of these costs have been provided in Note 1.4 of the Financial Report. Where noted, profit and loss items have been adjusted to reflect these significant items. - In line with the classification of Petrol as a discontinued operation, the financial performance and operating metrics previously disclosed under ‘Australian Food and Petrol’ has been split to disclose Australian Food separately from Petrol in this announcement. Funds employed and ROFE have also been separately presented for Endeavour Drinks.
- Return on funds employed (ROFE) is calculated as EBIT before significant items for the previous 12 months as a percentage of average (opening, mid and closing) funds employed. This methodology has been adopted for FY17 and FY16. In previous reporting periods, ROFE was calculated as EBIT before significant items for the reporting period as a percentage of average (opening and closing) funds employed. Lease adjusted ROFE adjusts funds employed for the present value of future lease obligations and EBIT for the implied interest on those obligations.
- Growth for New Zealand Food is quoted in New Zealand dollars.
- Operating cash flow as a percentage of group net profit after tax before depreciation and amortisation.
- Group earnings before interest, tax, depreciation, amortisation and rent (EBITDAR) divided by rent and interest costs. Rent and interest costs include capitalised interest but exclude foreign exchange gains/losses and dividend income.
- The credit ratings referred to in this document have been issued by a credit rating agency which holds an Australian Financial Services Licence with an authorisation to issue credit ratings to wholesale clients only. The credit ratings in this document are published for the benefit of Woolworths Group’s debt providers.
Sales
NZ$6,232M
2.1% from 2016
EBIT
NZ$309.4M
1.4% from 2016
"I was happy with fruit and vegetable items available and the fact that there was a good choice of berries."