Australia’s largest supermarket chain announces a significant write-down on its New Zealand operations, citing market conditions and ongoing restructuring.

Woolworths, Australia’s largest supermarket chain, announced on Monday (Jan 29) that it will record a non-cash impairment of NZ$1.6 billion (approximately US$1 billion) for its fiscal 2024 half-year results. This impairment follows a review of its New Zealand Food segment, marking a significant write-down against the company’s current goodwill balance of NZ$2.3 billion.

The decision to conduct the impairment stems from the company’s assessment of the weaker medium-term market outlook in New Zealand and the ongoing challenges in its organizational transformation. Woolworths had originally acquired Foodland’s New Zealand supermarket assets in 2005, in a deal valued at A$3.38 billion (S$3 billion), which included wholesale and supermarket businesses.

In a statement, Woolworths explained that it was “prudent” to review the carrying value of the goodwill on its balance sheet that was booked as part of the 2005 acquisition. The company highlighted that despite efforts to improve operations, its New Zealand business had not yet realized the full potential of its organizational restructuring.

The company also provided an update on its first-half earnings, revealing that it expects to report earnings before interest and tax (EBIT) of NZ$71 million for the New Zealand segment. This figure represents a 42% decline from the previous year’s results, underscoring the challenges faced by the division.

Woolworths’ decision to impair the New Zealand segment is a reflection of broader market conditions, as the country’s supermarket sector grapples with weaker economic performance and heightened competition. Despite these challenges, the supermarket giant remains one of the leading players in the region.