Coles has released its 2023 half year results, with Group sales revenue increasing by 3.9% to $20.8 billion.
“We continue to make progress on growing long term shareholder value by executing our strategy, whilst recognising the significant ongoing challenges facing many of our customers and suppliers,” says outgoing CEO Steven Cain.
“Coles continues to be one of Australia’s most trusted brands and for our customers, we delivered hundreds of Dropped&Locked prices to help keep inflation below the national average, an improved Flybuys program, and free glassware in supermarkets, alongside our popular Price Drops campaign in Liquor.
“The good news is that supplier cost inflation is starting to ease in the third quarter, particularly in produce. Many of our suppliers are, however, still facing increasing cost pressures and shortages of pallets, raw materials and labour. This has been coupled with increased severe flooding impacting our road and rail networks, particularly for Western Australia and Far North Queensland. We are working together with our suppliers, and both state and federal governments, to improve food supply chain resilience for all Australians.
“Once again, our team has shown amazing support for the needs of our local communities, in particular during the floods in NSW and Victoria.
“In January, our first Witron automated distribution centre in Queensland, the largest in the Southern Hemisphere, began receiving in-bound inventory deliveries. This along with our other three major automation projects, that are in various stages of internal fit out, demonstrate our commitment to innovation and continued long term investment in supply chain efficiency and customer experience.”
Supermarkets
Supermarkets sales revenue was $18.9 billion for the half. This was an increase of 4.6% on the prior corresponding period and 13.6% on a three-year basis.
Gross retail sales of $19.6 billion increased by 5.3% and comparable sales grew by 4.9% on the prior corresponding period.
For the second quarter, sales revenue increased by 7.4% year-on-year and 13.5% on a three-year basis.
According to Coles, sales were supported by the Locked and Dropped&Locked value campaigns and Flybuys member pricing for customers seeking trusted value. The Harry Potter Magical Builders collectibles and the Schott Zwiesel glassware customer continuity program also supported sales.
Volumes improved in the half, said to be driven by new campaigns and a reduction in the impact of cycling elevated Covid-19 volumes in the prior corresponding period as the half progressed.
Despite this, Coles says availability challenges remained across many categories, particularly in fresh and frozen produce with severe flooding and cool weather impacting growing conditions. In pet food, production challenges impacted industry supply, whilst reduced flock sizes affected eggs and poultry. In addition, national rail outages across key supply routes impacted a number of states, particularly the TransAustralian Railway which had a significant impact on availability in Western Australia.
Along with the launch of the Locked and Dropped&Locked campaigns, the retailer expanded its Exclusive to Coles range to more than 6000 SKUs with 770 new product launches during the half. Exclusive to Coles sales of $6.3 billion were recorded in the first half, an increase of 7.1% on the prior corresponding period.
The Coles Own Brand portfolio also won 83 product awards including a Product of the Year award across products such as Coles Finest Certified Carbon Neutral Beef Scotch Fillet Steak, Coles Perform Chicken Kale and Quinoa Soup, and KOi for Men Hydrating Aloe and Patchouli Face Moisturiser. Coles says its Own Brand’s efforts to lead industry change in responsible sourcing practices also resulted in the retailer’s Urban Coffee Culture Organic Home Compostable Capsules winning the AFR BOSS Most Innovative Companies Award in the retail, hospitality, tourism and entertainment category and the WorldStar Packaging Award for innovation and ease of use.
Following the “disappointing” collapse of the REDcycle soft plastics recycling scheme, Coles says it’s working with industry and governments to help find a solution to both the current stockpiles, and the future of soft plastics recycling in Australia.
E-commerce sales revenue was $1.4 billion for the half. This was a decline of 6.6% (three-year growth of 102%) with penetration of 7.2%, compared to 8.2% in the prior corresponding period, as Covid-19 behaviours normalised and some customers returned to shopping in store.
Coles says progress was made during the half to support a “unified omnichannel experience” with the launch of a unified website to support anytime, anywhere, anyhow shopping. New features focused on improving the customer experience include the ability to sort products by unit price, ability to select single item substitutions and enhanced filtering options to include ‘Specials’ and ‘Bought Before’, enabling “greater convenience” and value.
The unified shoppable app was also “enhanced” with customers now able to complete their shop natively within the app with no web redirects.
The Coles Online network was expanded, too, through the addition of 30 same day home delivery stores and 42 Click & Collect (to the boot of car) stores added during the half.
Total supermarkets price inflation of 7.7% was recorded for the second quarter. This compared to 7.1% in the first quarter said to be driven by packaged inflation including dairy, as a result of increases in the farmgate milk price, and an “elevated” level of supplier input cost price increase requests, particularly in homecare and pantry. Freight and utilities were the main drivers of the supplier input cost price increase requests.
During the half, Coles completed 15 renewals, opened 10 new stores and closed three stores, taking the total network to 842 supermarkets.