What is the true measure of a grocer’s profitability?
There’s solid ground to dismiss Nick McKim’s use of return on equity. But his audience is not wonky accountants – it’s disgruntled punters facing higher bills.
According to Greens senator Nick McKim, Woolworths has a return on equity of 26 per cent – and given it is more than twice that of the major banks, the supermarket giant’s shareholders are “making off like bandits”.
No wonder Woolworths chief executive Brad Banducci was pushing back. The reality is that McKim is right on the return on equity figure, and that it is roughly twice that of the big banks. But that does not mean Woolworths is making sky-high profits.
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Jonathan Shapiro writes about banking and finance, specialising in hedge funds, corporate debt, private equity and investment banking. He is based in Sydney. Connect with Jonathan on Twitter. Email Jonathan at jonathan.shapiro@afr.com
