Aggressive marketing pays dividends for Coles

Jon Condon, 03/02/2012


Aggressive marketing and price discounting strategies appear to be paying big dividends for supermarket group, Coles, following parent company, Wesfarmers' release  yesterday of second quarter trading and financial results.

Managing Director, Richard Goyder, said that given a relatively tough retail environment and widespread price deflation he was pleased with the Group’s results, particularly the momentum in the Coles supermarket division and Bunnings.

Both businesses recorded good sales growth in the second quarter, ended December 31.

“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. The second quarter 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,” a release said.

Mr Goyder said in a retail environment where consumer sentiment remained subdued, each of Wesfarmers’ 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 division’s  total food and liquor sales for the second quarter grew by 4.3 per cent to $7.3 billion, while first half-year sales increased by 4.9pc to $13.6 billion.

In the fourth year of the turnaround, Coles delivered comparable food and liquor store sales growth of 3.7pc in the second quarter and 4.4pc in the first half, with underlying volume growth continuing strongly, the statement said.

“Volume growth exceeded sales growth as deflation in fresh produce and continued investment in value led to food and liquor deflation (essentially, price cutting) increasing to 2.4pc in the second quarter. Deflation for the quarter reflected an increase from deflation of 1.8pc in the first quarter, resulting in deflation of 2.1pc in the first half,” Wesfarmers said.

Coles managing director, Ian McLeod, said the business had made good progress in the second quarter and customers rewarded Coles for its continued investment in lower prices as part of its “Down, Down” campaign.

“We have delivered share growth across all of Coles? businesses,” Mr McLeod said.

“We’re 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 17 million customer transactions in Christmas week alone, up one million on the same week last year, and the average volume of weekly transactions continued 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 in warehousing and other areas. In addition, Coles now has almost 2000 self-scan check-outs reducing queuing times for customers in 300 supermarkets.

Together with its value investment, Coles continues to roll out its store revamp program. The company renewed 30 supermarkets and opened six new ones during the quarter.


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