Woolworths is set to record a non-cash impairment of $974.4 million (NZ $1.6 billion) for its fiscal 2024 half-year results following a review of its NZ food segment.
The company said that the New Zealand business has been seeing the effects of a weaker medium-term market outlook, transformation initiatives to reach full potential, and the impact of higher interest rates on discount rates.
“It is prudent to review the carrying value of the goodwill on the balance sheet that was booked as part of Woolworths Group’s original acquisition of Foodland’s New Zealand business in 2005,” said the company in a statement.
The company said that the impairment will result in a write-down against Woolworth’s current goodwill balance of NZ $2.3 billion.
Brad Banducci, CEO of Woolworths Group, said confidence in the potential of Woolworths New Zealand and the transformation plan remain unchanged.
“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.”
During the half, 34 stores rebranded to Woolworths, with improved relative sales performance in these stores, and there was an overall improvement in sales momentum towards the end of Q2.
Despite this, the company said trading performance in New Zealand Food has continued to be challenging, with H1 F24 EBIT expected to be NZ $71 million, 42 per cent below the prior year.
Further details will be provided at Woolworth’s F24 half-year results scheduled for 21 February 2024.