Saturday, June 22, 2024

Coles welcomes solid FY2022 performance

A third year of strategy execution delivered solid supermarkets sales and earnings despite significant Covid-19 and flood disruptions, reported Coles Group in its 2022 Full Year Results.

Despite cycling significantly elevated Covid-19 driven demand in the prior corresponding period, FY22 Group sales revenue of $39.4 billion increased by 2.0% in FY22 (12.4% on a three-year basis). Group gross retail sales of $40.5 billion increased by 2.7% (13.3% on a three-year basis).

“We have now delivered the third year of our transformation strategy, including significant growth in our eCommerce operations, coupled with additional efficiencies from our Smarter Selling program,” said Coles Group CEO Steven Cain.

“We continue to focus on delivery of our vision to be the most trusted retailer in Australia and grow long-term shareholder value.”

Supermarkets adapt to demand

Supermarkets sales revenue was $34.6 billion for the year, an increase of 2.2% on the prior corresponding period and 12.0% on a three-year basis.

Coles attributed sales revenue growth to the successful execution of trade plans throughout the year, as well as value campaigns focused on lowering the cost of living for customers. eCommerce also contributed to sales revenue growth, particularly in the first half during the lockdowns in NSW, Victoria and the ACT.

During the year, Coles Online increased its network coverage with 95% of Australians now having access to home delivery and Click & Collect expanding to reach more than 740 stores. With a focus on immediacy, Click & Collect Rapid was expanded to more than 450 stores and same day home delivery expanded to more than 520 stores.

Customer satisfaction, as measured by Net Promoter Score (NPS), was negatively impacted as a result of supply chain challenges, which impacted availability for customers, particularly in the second half.

Price inflation of 1.7% was recorded for the year and 4.3% for the fourth quarter. To counteract this, “trusted value” was delivered during the year through the Exclusive to Coles range with sales revenue growing by 4.2% to $11.4 billion in FY22 and seasonal value campaigns and everyday pricing continuing to support strong value offers across the year.

Coles completed 50 store renewals during the year including 12 Format A, 22 Format C and six Coles Local stores. For the year, 11 new openings and ten closures were completed. At the end of FY22 there were 835 supermarkets in the fleet.

Liquor benefits from RTDs & spirits

Liquor sales revenue was $3.6 billion for the year, an increase of 2.5% on the prior corresponding period and 18.0% on a three-year basis while comparable sales grew by 2.1%. The Christmas and Easter trading periods were strong. Liquorland was the strongest performing banner with 191 Black and White Liquorland renewals completed, providing customers with an enhanced range of local wines, craft beers and boutique spirits. At a category level, Ready-To-Drink and Spirits were the key drivers of growth.

Express impacted by lockdowns

C-store sales revenue was $1.1 billion for the year, a decrease of 5.0% on the prior corresponding period, however increased by 8.1% on a three-year basis.

Coles attributed the performance to the impacts lockdowns in NSWs, Victoria and the ACT; reduced mobility from the Omicron variant and flood events in NSW and Queensland. The cycling of strong tobacco sales in the prior corresponding period due to the impacts of Covid-19 also had an impact. Excluding tobacco, c-store sales grew by 0.9% in FY22 with strong growth in food-to-go, including coffee and hot fast food, as well as drinks following recent range review activity.

Automation projects on track

Construction and installation of two automated DCs as part of an established partnership with Witron is said to be progressing well despite the challenges of Covid-19, disrupted global transport and supply chains. The facilities are due to be commissioned within the previously communicated timeframes: The Redbank Queensland facility in 3Q23 and Kemps Creek NSW in 3Q24.

Reflecting on its partnership with Ocado, Coles reported that its eCommerce sales are now 2.7x the level at the time of entering our partnership with the technology and automation company. As such, Coles’ strategic plans have adapted to meet this significant uplift in demand and include significant investment in digital platforms and nationwide capacity.
In order to maximise the potential of its customer fulfillment centres (CFCs), in addition to the significant eCommerce investments, Coles has enhanced the customer offer to include features such as onsite bakeries and fresh cut produce rooms (a world first) and expanded the catchment zones within the hub and spoke model.

The automated CFCs are due to open within the previously communicated timeframes: the NSW facility is due to open in 1Q24 and the Victorian facility in mid-FY24.

Support in challenging times

Mr Cain acknowledged the hard work of Coles’ team members, suppliers, and community partners in overcoming significant supply chain challenges, and also commented on the ongoing pressures facing households.

“With Australian families facing increased pressure on household budgets, our commitment to delivering trusted value remains more important than ever. As examples, we are beginning to see our customers buying significantly more $1 Coles pasta and our $1 coffee at Coles Express has never been more popular,” he said.

“The ongoing headwind of rising cost inflation further underscores the importance of our Smarter Selling program. The commissioning commencement of three of our four automated distribution centres and online customer fulfilment centres in 2023 will also allow us to drive future efficiencies while delivering an enhanced offer to inspire customers.”

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