Panic buying pushes Coles to sales growth record in third quarter

ELI GREENBLAT
APRIL 29, 2020

The Australian

Coles has recorded its strongest ever growth in the key retail metric of same-store sales during the third quarter. Comparable sales growth for the quarter was up by 13.1 per cent, driven by panic buying in the wake of the coronavirus pandemic.

But the supermarket continued to record subdued trading for its liquor stores coming out of the bushfires in early January, as well as depressed petrol sales volumes as Australians remained locked up at home because of isolation measures.

The double-digit sales leap in the third quarter was almost double the previous high of 7.3 per cent growth for the fourth quarter of 2009.

The lift in supermarket sales was boosted by cooking ingredients, helped by consumers staying at home rather than eating out, and the success of the new TV series of MasterChef, which together encouraged more shoppers to try their hand at home cooking.

Coles reported on Wednesday total supermarket sales up 13.8 per cent to $8.23 billion across the third quarter, with liquor same-store sales up 7.2 per cent and its express petrol stations and convenience stores reporting like for like sales growth of 4.3 per cent.

Total sales for the quarter across the Coles group was $9.226 billion, up 12.9 per cent overall or 12.4 per cent on a comparable basis.

Comparable store sales figures are a key metric in retail as they discount the effect of new stores opening.

Although there was a bump in take-home liquor sales as the nation’s pubs, hotels and restaurants remained closed because of the health crisis, the quarter was dominated by weaker liquor sales due to the bushfires around Christmas, with the resulting smoke that blanketed large parts of the country putting a stop to many social occasions.

At Coles’ convenience and petrol stations there was some uplift in sales in March as shoppers panic-bought key grocery items but this was offset by much lower fuel volumes late in March with less road traffic due to social distancing measures that required people to largely remain off the road and at home. While weekly fuel volumes peaked at around 70 million litres during the quarter, the business ended the quarter selling around 50 million litres per week.

Turning to outlook, the supermarket said the first four weeks of the fourth quarter, which included the Easter period and ANZAC Day, supermarkets comparable sales growth had broadly trended back toward the levels seen in the early part of the third quarter (pre COVID-19).

During this period, Coles has seen an increase in basket size which has been partially offset by a decline in transactions driven by social distancing measures, it said.

Easter trading was more subdued this year than prior years due to restrictions on traditional family and friends events and celebrations.

“As more customers either work at home or stay at home there is early evidence of customers changing their habits, purchasing less convenience and impulse products and moving towards more cooking and baking from scratch,’’ Coles said.

“This is supported by the best viewer numbers of MasterChef in five years. As the federal and state governments successfully flatten the COVID-19 curve we are also beginning to see destocking of some pantry lines like pet food.”

Coles does expect however an increase in costs in the fourth quarter as a result of the additional investment it is making as a result of COVID-19. This investment includes higher remuneration costs due to additional team members in store to ensure a safe environment for customers and team members, investment in additional cleaning, security and queuing systems in order to comply with social distancing guidelines, more hand sanitiser, the introduction of check-out screens, and flu vaccination rebates for team members.

Liquor is expected to continue to experience elevated sales as long as restrictions on hotels, pubs, clubs and venues remains in place.

The biggest quarterly sales leap in Coles history was driven by the panic buying witnessed across the country in March and April as shoppers stocked up on essential groceries such as toilet paper, rice, pasta, tinned food and personal hygiene products as they feared the coronavirus pandemic would soon see them isolated at home.

In scenes at Coles, Woolworths, Aldi and independent chains, customers fought over groceries, especially hard to get items such as toilet paper, forcing the leading supermarkets to impose buying limits first on toilet paper and then quickly following that other basic items such as pasta, rice, flour and cooking staples.

Those buying limits were imposed for more than a month with Coles only on Tuesday announcing that it would lift the purchase limits on toilet paper although buying limits would remain on 10 other items as the supply chains of grocery suppliers caught up with demand.

The buying frenzy thorough mid-March was so strong that at one point Woolworths chief executive Brad Banducci described the huge spike in demand as like the supermarkets trying to feed 50 million people a week instead of 24 million.

Coles chief executive Steven Cain commented in March that 28 years in the supermarket game he had never seen anything like it.