Supermarket giant Countdown is expecting earnings before interest and taxes for the first half of the 2023 financial period to be between $100 million and $130m – down from the $200m it delivered during 2022’s first half. 

The grocery chain's sales edged down by 2.5% in its 2023 first quarter as inflation nibbled away its margins.

Chief executive Brad Banducci said customers' shopping behaviours and the trading environment were continuing to normalise after last year’s sales were affected by the pandemic.

The New Zealand division of Woolworths Group reported sales of $2.007 billion in the 14 weeks ended Oct 2, down 2.5% from $2.060b in the same period a year earlier.

Woolworths Group saw sales come to $16.4b, up 1.8% from the previous corresponding period.

Banducci said inflation was continuing to accelerate in the first quarter, compared to the prior year, with average prices in the Australian food division increasing by 7.3%, and NZ food division up by 5.3%.

The NZ food division was seeing signs that the trading environment was stabilising, Banducci said, due to the combination of lower sales and “materially higher wage inflation”.

This meant the group was expecting earnings before interest and taxes for the first half of the 2023 financial period to be between NZ$100m to $130m – down from the $200m the supermarkets brought in during 2022’s first half.

Banducci said the company expected the second-half Ebit for the 2023 financial year to be above both the first half of the 2023 financial year and the second half of the 2022 financial year, with uncertainty around the speed of the improvement.

The supermarket giant was bracing itself for high wage inflation following a new national collective agreement between First Union and Countdown for 18,000 of Countdown’s employees.

The two-year collective agreement includes wage increases of around 12%, a starting living wage of $23.65 an hour, better sick leave and pandemic leave, and a bigger commitment to working on urgent security and staffing issues.

“Ongoing supply chain volatility and the possibility of another wet summer will be key challenges to navigate, but we are seeing strong early sell-through of seasonal lines and we remain cautiously optimistic for the period ahead,” Banducci said.

Across Woolworths' NZ supermarkets in the first quarter of the 2023 financial year, Countdown stores brought in $1.6b – down 3.6% from 2022’s first quarter – while SuperValue, FreshChoice and other revenue fell by 6.4% to $159 million.

Countdown’s e-commerce saw a 5.9% jump to $285m.

“Customers put fewer items in their baskets in the quarter with comparable items per basket declining by 14.3%,” the company said in its report. 

“Basket sizes also reflect the impact of rising inflation as well as mix benefits during covid beginning to normalise.”