Coles remains ‘solid’ during a year of ‘substantial’ change

Coles Group sales revenue (excluding fuel sales and hotels) increased by 3.1 per cent to $35 billion for FY19.

Sales revenue growth was seen across Supermarkets, Liquor and Express.

Coles CEO Steven Cain says Coles has delivered a solid performance in the face of a rapidly changing retail landscape.

“It has been a year of substantial change for Coles following the successful demerger and ASX listing from Wesfarmers in November 2018,” he said.

“As highlighted at our Investor Day in June, consumer behaviours are changing faster than ever, we are heading into the most competitive period in Coles’ history, and there are significant industry wide cost headwinds.

“With the return to profit growth in our core supermarkets division we have made a solid start to our four-year transformation program. Delivery of our sales growth strategy and the $1 billion Smarter Selling program will be critical to Group EBIT growth.”

Supermarket performance and incentives

Supermarkets sales revenue was $30.9 billion for FY19. This is an increase of 3.2 per cent on the prior year, with comparable sales growth of 2.7 per cent.

For the fourth quarter, supermarkets sales revenue increased by three per cent. Comparable sales growth was 2.2 per cent relative to the prior corresponding period. This is 47th consecutive quarter of positive comparable sales growth.

Sales revenue growth, says Coles, was driven by online, new stores and successful collectable campaigns (eg, Little Shop and Fresh Stikeez).

Inflation also started to increase impacted by severe drought conditions in Australia. Overall, total supermarkets price inflation of 0.8 per cent was recorded for FY19, and 1.4 per cent in the fourth quarter.

For the full year, Coles says comparable sales growth was largely driven by basket size although transaction growth also showed signs of improvement since the beginning of the second quarter.

Sales growth for the year was recorded across all states. Category growth was particularly strong in bakery, meat and dairy.

Flybuys also had a positive impact on customer engagement and sales. Flybuys membership reached record highs in the fourth quarter with 6.6 million active households.

To further embed trusted value, Coles says it continued to invest in lowering prices for its customers. This saw deflation excluding tobacco and fresh of 1.2 per cent for FY19, and 0.9 per cent for the fourth quarter.

According to Coles, it continued to lower the cost of living and provide an expanded and better value choice for its customers during the year through Own Brand. Own Brand sales grew by 5.9 per cent in FY19 and now represents a $9 billion business.

New brands launched throughout the year include Wellness Road health products, Nature’s Kitchen vegan range, Curtis Stone’s ‘Cook with Curtis’ and ‘I’m Free From’.

Clicks and bricks

Coles Online achieved $1.1 billion of sales revenue in FY19. This was an increase of 30 per cent on the prior year.

Coles Online now contributes 3.6 per cent of supermarket sales and importantly, says Coles, achieved profitability for the first time in its 20-year history. Profitability, according to Coles, has been largely achieved through scale, the growth in Click & Collect as well as technology investments in home delivery.

Coles supermarkets have continued to invest in the store network with the roll-out of new formats and tailored store offerings to meet local customer tastes and demand.

Coles has commenced the roll-out of its new Format A stores focused on convenience and a premium fresh food offer. One store in Eastgardens, NSW has already been completed.

The roll-out of Format C stores, focused on driving operational efficiencies, also continues with Clayton and Ardeer in Victoria already completed.

Separately, a dedicated front of store convenience space featuring and expanded food for now and food for later range is expected to be rolled out to 100 stores by the end of the 2019 calendar year.

Coles supermarkets expanded and improved its network during the year with 51 refurbishments, 22 openings and 10 closures, ending the period with 821 supermarkets.

Liquor and Express

Liquor sales revenue was $3.1 billion for the year. This is an increase of 1.9 per cent on the prior year with comparable sales growth of 1.2 per cent.

Convenience store sales growth was 1.2 per cent for the year and 0.1 per cent on a comparable sales growth basis. This, says Coles, is largely a result of declining tobacco sales

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