Coles announces results

Coles
2 February 2012

Wesfarmers Limited today released its second quarter retail sales results for the period ending 31 December 2011.

Managing Director, Richard Goyder, said that given a relatively tough retail environment and widespread deflation he was pleased with the Group‟s sales result, particularly the momentum in Coles and Bunnings, where both businesses recorded good sales growth in the second quarter.

“Our retail businesses continue to work hard to execute strategies that are improving the value and shopping experience of their customers,” Mr Goyder said.

“Coles reported its fourteenth straight quarter of comparable store sales growth with customer numbers and sales units continuing to grow faster than sales. This period delivered a record- breaking Christmas, with Coles achieving its biggest ever sales week as more customers responded to the greater value offered as well as improvements in product quality and in-store service.

“Bunnings‟ sales increased 5.5 per cent in the quarter, despite ongoing deflationary impacts, reflecting a solid contribution from new store openings and growth in both consumer and commercial areas.

“Kmart and Officeworks continue to benefit from initiatives put in place to reposition these businesses. It was encouraging to see that both divisions reported another quarter of strong growth in both units sold and customer transactions although sales were affected by the deflationary pricing environment.

“Target experienced difficult trading conditions in the quarter with total sales declining 3.1 per cent. December sales were, more encouraging as the business took steps to improve promotional effectiveness and stock management.”

Mr Goyder said in a retail environment where consumer sentiment remained subdued, each of our retail businesses had managed their seasonal inventory positions well with appropriate levels of good quality inventory on hand, which would be of benefit going into the second half.

COLES
Food and Liquor

Coles‟ total food and liquor sales for the second quarter1 of the 2012 financial year grew by 4.3 per cent to $7.3 billion. Total sales in the first half8 of the 2012 financial year increased by 4.9 per cent to $13.6 billion.

In the fourth year of the turnaround, Coles delivered comparable food and liquor store sales growth of 3.7 per cent in the second quarter1 and 4.4 per cent in the first half8, with underlying volume growth continuing strongly.

Volume growth exceeded sales growth as deflation in fresh produce and continued investment in value led to food and liquor deflation increasing to 2.4 per cent in the second quarter1. Deflation for the quarter reflected an increase from deflation of 1.8 per cent in the first quarter, resulting in deflation of 2.1 per cent in the first half.

Coles Managing Director, Ian McLeod, said all of Coles‟ businesses had made good progress in the second quarter and customers rewarded Coles for its continued investment in lower prices as part of our „Down Down‟ campaign.

“We have delivered share growth across all of Coles‟ businesses,” Mr McLeod said.
“We were particularly pleased with the strong volume growth which has been driven by investment in value, quality, and service at a time when Australian families are looking to manage tight household budgets.

“As we continue the transformation program, we are encouraged that our drive to change the business has resonated well with customers and is reflected in improvements in perception and increasing customer numbers.”

Coles supermarkets and liquor stores recorded over 17 million customer transactions in Christmas week alone, over one million more transactions than in the same week last year, and the average volume of weekly transactions continues to rise. Online sales and transactions again recorded double digit growth.

Coles‟ investment in value has been enabled by continued reduction in costs and increases in efficiency. Easy Warehousing, part of Coles‟ internal efficiency program, was completed during the quarter providing improved productivity for the business and its suppliers. The efficiency programs continue to generate significant savings to re-invest in better value for customers. In addition, Coles now has almost 2,000 self-scan check-outs reducing queuing times for customers in over 300 supermarkets.

Together with its value investment, Coles continues to roll out at a pace its market leading renewal format. Coles renewed 30 supermarkets, opened six new supermarkets and closed four underperforming supermarkets during the quarter. Coles now has a total of 193 supermarkets in the renewal format, having renewed 49 in the first half. Coles opened 19 new liquor stores during the second quarter taking the total number of liquor stores to 886.

Convenience

Total Coles Express sales, including fuel, for the second quarter1 were $2.1 billion, an increase of 16.3 per cent on the previous corresponding period. Total sales for the first half8 were $3.9 billion, 17.0 per cent ahead of the same period last year.

Mr McLeod said the value investment in fuel remained popular with customers, resulting in record levels of shopping docket redemptions at Coles Express. This contributed to 2.5 per cent growth in comparable fuel volumes during the quarter1 and 3.7 per cent growth for the first half8.

Convenience store sales, excluding fuel sales, grew by 0.7 per cent for the quarter1 and 1.2 per cent in the first half8. Comparable store sales declined 1.4 per cent in the second quarter1 and 0.5 per cent in the first half8, as a result of lower discretionary spending by customers.

As part of its convenience store renewal program, Coles Express opened three new sites and closed one site during the second quarter1, bringing the total store network to 625 sites across the country.