Woollies chief reveals juicy Aussie margins

Kiwi consumers are getting a better deal from Woolworths supermarkets than their Australian counterparts because of the business’s stronger market position here, chief executive Michael Luscombe has admitted.

This was just one of the revelations to emerge from Luscombe’s appearance before the Australian Competition and Consumer Commission’s grocery price inquiry yesterday.

Luscombe said that Woolworths achieves a 75% “return on funds” from its Australian supermarkets, compared to less than 10% from its New Zealand operations.

He also admitted Woolworths uses local and state government planning regulations to try and block the expansion aspirations of competitors, arguing this is a common practice in the sector.

“We make no apology for the fact that we grow our businesses by growing our sales, and we do that by improving sales in existing business and getting new businesses up and running,” Luscombe said.

University of NSW trade practices expert Frank Zumbo says Luscombe’s comments to the ACCC raises more questions than it answers.

“There has always been suspicions that Woolies and others have used zoning laws to stop competitors. They may have rights under those laws, but if they are being used in an anti-competitive way that does raise issues under the Trade Practices Act that (ACCC chief) Graeme Samuel needs to look at closely,” Zumbo says.

Luscombe’s comment that Woolworths stores “are not the cheapest on every product” should also be examined further, Zumbo says.

“If Woollies aren’t be the cheapest on all items, I think shoppers would be interested to know more about that statement and why they aren’t striving to be the cheapest, so it has provoked some questions that need serious consideration,” he says.