Despite a hefty write-down of its New Zealand Food business, a change in how it accounts for its 9.1 per cent holding in Endeavour Group, and an under-performing Big W, Woolworths Group still expects its earnings to increase by 2.8-3.8 per cent to roughly $1.7 billion before tax and interest this year.
The company said that despite making “significant progress” on its transformation program for the New Zealand business, conditions were still challenging, with H1 FY24 EBIT expected to be 42 per cent lower than FY23 at NZ$71 million, which includes the NZ$13 million in costs on transforming the business.
In light of this and a three-year forecast for the unit, Woolworths announced it would record a NZ$1.6 billion write-down against the current goodwill balance of NZ$2.3 billion.
Woolworths Group CEO Brad Banducci said the group still had confidence in the potential of New Zealand Woolworths and its transformation plan.
“While the short-term performance has been impacted by a variety of factors and the speed of improvement remains uncertain, we are seeing early positive signs from our Kiwi customers as our transformation gathers momentum,” Banducci said.
Level of influence
At the end of 2023, Woolworths reviewed its 9.1 per cent interest in Endeavour Group in terms of the level of influence it had over the hotels, alcohol, and gaming operator, and decided it no longer had significant influence.
As a result, its investment in Endeavour would be recorded as a financial asset instead of an equity accounted investment.
The impact of the accounting change is a loss of $209 million.
Meanwhile, the financial performance of PFD and its Australian Food unit are “solid”.
Its H1 FY24 results will be released on 21 February.
