Countdown posts $20m rise in net profit as watchdog advances its market review

Thursday, 10 December 2020

Countdown’s sales rose more than 7 per cent during year in which many retailers suffered significantly from Covid restrictions.

Woolworths NZ, owner of the Countdown supermarket chain, has posted a $20 million or 11.2 per cent rise in its net profit to $202m for the year to June 28.

Its full accounts were made public on the same day that the Commerce Commission released more details of its market study of the supermarket and groceries industry, ordered by Consumer Affairs Minister David Clark last month.

Countdown’s bigger bottom line, reported in accounts filed with the Companies Office, compares with a $182m profit in the previous 53-week period.

The chain’s Australian listed owner, Woolworths Group, had previously reported that Countdown enjoyed a 10.7 per cent increase in its operating profit for the period.

Commerce Commission chairwoman Anna Rawlings is inviting feedback on the issues the watchdog intends to examine in the supermarket sector.

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That operating profit did not take into account financing income and charges and tax.

The local accounts confirmed a 7.1 per cent rise in Countdown’s revenues to $7.2b during a year in which many retailers suffered significantly from Covid restrictions.

The Commerce Commission study could result in more information being made public on the profitability of rival New Zealand-owned cooperative Foodstuffs – owner of the New World and Pak’N’Save franchises – and potentially on the profitability of its separately-owned individual stores.

The regulator released a “preliminary issues paper” setting out the proposed framework for the market study on Thursday.

That indicated it would look at the intensity of competition between grocery retailers and whether features of the sector were affecting the potential entry of a new competitor.

The commission intends to consider competitive outcomes in the grocery sector including prices, choice, quality and innovation, the margins and profitability of grocery retailers, and whether there are outcomes that are not consistent with those expected in a competitive market.

It also identified the impact house-branded products were having on competition at the supplier level as a potential issue, and consumer purchasing behaviour – including how retailers’ pricing strategies and promotional activity affected consumer purchasing behaviour.

Another topic may be whether any changes to the sector may have occurred during the Covid-19 pandemic that might affect competition over the longer term.

Industry insiders expect one outcome of the review will be a regulated industry code similar to Australia’s Food and Grocery Code of Conduct or the UK’s Groceries Supply Code of Practice, to protect suppliers from Countdown and Foodstuffs’ market power.

“The purpose of our market study is to look at whether competition is working well for consumers, and if not, what can be done to improve it,” commission chairwoman Anna Rawlings said.

“We welcome feedback on our preliminary issues and proposed scope from all interested parties.

“We also intend to engage more directly with a range of stakeholders, including consumers and smaller suppliers and retailers early in the New Year.”

Submissions on the issues paper close on February 4 and the commission is scheduled to deliver its final report by November 23 next year.