Domestic

Coles ‘Down, down’ campaign sends sales growth ‘Up, up’

Jon Condon, 28/07/2011

 

Store revamps have transformed older Coles supermarkets into ultra-modern consumer-friendly outlets like this one at Cannon Hill, in Brisbane's inner east.Wesfarmers’ Coles Food and Liquor division has posted solid 6.3 percent sales growth for the 2011 full-financial year, in results released to the market this afternoon.

Managing director Richard Goyder said the retail division’s sales performance for the year was solid, especially given the backdrop of declining consumer confidence, significant price deflation and adverse weather conditions experienced during the period.

“A highlight of the result was the continuation of the strong sales momentum in Coles and Bunnings, building on strong results from the previous year,” he said.

As households had experienced higher costs of living and an increased propensity to save, all of the Wesfarmers group’s retail businesses had worked to provide genuinely better value and an improved customer offer, he said.

Coles’ food and liquor comparable-store sales growth for 2010-11 of 6.3pc, followed 5pc growth for the same period a year earlier. Woolworths comparable growth for 2010-11 was 4.3pc.

Price wars between the two over the past eight months on food staples like beef and milk has obviously boosted turnover, but arguably at the expense of profit.

The Coles result reflected the “pleasing customer response to changes made throughout the business to build trust in our value, quality and service,” Mr Goyder said.

Coles, the nation’s second largest retailer after Woolworths (see last week’s story, “Woolies posts $36.2b in supermarket sales”) reported comparable food and liquor stores sales growth for the fourth quarter just completed of 5.2pc, up from 4.2pc for Q4 last year.

Headline food and liquor sales for the financial year (total sales from this year as opposed to comparable same-store sales)were $25 billion, up 6.3pc on the previous corresponding period and for the fourth quarter were up 5.3pc to $6.2b. That signals a narrowing of the competitive gap between Woolworths and Coles.

Coles recorded food and liquor price deflation of 0.3pc in the 2010-11 financial year despite the impact of higher excise on tobacco products, and recent floods on fresh food prices. Excluding the impact of higher tobacco excise, Coles recorded food and liquor price deflation for the year of 1.6pc, similar to Woolworths.

In the fourth quarter, Coles food and liquor price deflation including the impact of higher excise on tobacco prices was 0.8pc and excluding the impact of the tobacco excise, food and liquor deflation was 1.6pc.

Value-added lines like these marinated beef ribs are extending Coles' beef offer in new directions. Beef Central hopes to sample this innovative VA item - possibly the first packaged beef rib line offered in Australian supermarkets - and will report back to readers on performance in coming weeks.Coles managing director Ian McLeod said he was encouraged by the underlying comparable sales growth achieved through increased supermarket transactions and bigger basket spend.

“Coles has developed a series of efficiency programs across the business, lowering our cost of doing business and creating a savings pool which we have used to re-invest in the form of lower prices, improved quality and better stores and service,” he said.

“Our customers have responded positively to our ‘Down, Down’ campaign to reduce shelf prices on the products they buy most against a backdrop of rising costs of living that has adversely affected consumer sentiment and industry sales.”

Coles had worked to reduce the total cost of the weekly shopping basket by cutting prices of staple grocery items, such as meat, milk and bread, to offset the impact of floods on prices of fresh produce, including bananas and field tomatoes.

The company’s supermarket renewal program continues at pace, with 38 supermarkets refurbished during the quarter, including stores at Emerald and Fairfield which had remained closed since Queensland’s January floods.

Coles opened two new format supermarkets in the quarter, taking the total to 144 renewal stores out of a national fleet of 741 stores (Coles and Bi-Lo). The Coles-branded store numbers have grown from 691 to 696 during the year.

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