THE sprawling conglomerate Wesfarmers has stolen the march on arch-rival Woolworths, with the Coles supermarkets division once again trouncing its groceries nemesis when it comes to sales growth.
Although it is still the junior partner in Australia's supermarket duopoly, Coles has wrestled the momentum from Woolworths for the third straight quarter as consumers begin to switch their purchases of fresh fruit, vegetables, food and liquor back to a business that only three years ago was struggling to match it with the market leader.
The victory has handed Richard Goyder and his team at Wesfarmers bragging rights over Woolworths, and will go a long way to alleviating investor concerns that, after Wesfarmers' $19 billion gamble on Coles, it would be unable to resuscitate the fortunes of the historic underperformer.
The company has pushed ahead with its turnaround at Coles, reporting comparable food and liquor sales up 4.2 per cent to $5.87 billion during the fourth quarter. During a year marked by higher interest rates and the absence of the stimulus package, total sales hit $23.6 billion - a gain of 5.6 per cent. On a like-for-like basis, sales were up 5 per cent.
Last week, Woolworths undershot analyst forecasts with a limp sales performance in the fourth quarter, reporting quarterly sales growth of 3.4 per cent and only 1.8 per cent on a comparable basis. Food and liquor sales growth for the year was 5.1 per cent (like-for-like 3.3 per cent), but with total sales a tick under $35 billion, it still easily dominates the supermarket sector.
"We are getting customer growth because we are doing a whole bunch of things better," Mr Goyder said.
The stores are friendlier, more open, we have less queues . . . more engaged staff, and the fresh offer is better, Mr Goyder said.
Coless association with blockbuster TV show MasterChef Australia had boosted the supermarket chains sales, he said. The company also announced yesterday it had signed a new two-year deal as the exclusive supermarket sponsor of the ratings winner.
Marking a departure from his mantra of Coless five-year turnaround timetable,Mr Goyder began to sketch the value of the business to Wesfarmerss investors over the next decade.
. . .What is important is we see opportunities for these businesses way beyond that five-year time frame and Im pleased [with] the position the group is in . . . because we have businesses that will provide growth for our shareholders and stakeholders for many years.
The performance of the last quarter and the last 12 months in Coles just underlines that opportunity but I would hasten to say there is a heck of a lot more work to do. Wesfarmerss other key retail assets, Kmart and Target, picked up when it purchased Coles. Both had flat growth for the year, and although Target reported a 4.4 per cent decrease in sales for the fourth quarter, it still outperformed Woolworthss key merchandise and apparels business, Big W.
The jewel in Wesfarmerss earnings crown, the hardware chain Bunnings, had full year sales of $6.41 billion, up 10.4 per cent, with fourth-quarter sales of $1.465 billion an improvement of 6.9 per cent.
Shares in Wesfarmers rose 94?, or 3.2 per cent, to close at $30.08
Frequently Asked Questions about this Article…
How did Coles perform in the latest quarter and full year in terms of sales growth?
Coles reported comparable food and liquor sales up 4.2% to $5.87 billion in the fourth quarter. For the full year Coles posted total sales of $23.6 billion, a gain of 5.6%, and like-for-like sales were up about 5%.
How does Coles' recent sales growth compare with Woolworths' sales performance?
Coles has outpaced Woolworths for the third straight quarter. Woolworths reported quarterly sales growth of 3.4% and comparable growth of 1.8% in the fourth quarter; its food and liquor sales rose about 5.1% for the year (like-for-like 3.3%). Despite Coles' stronger recent momentum, Woolworths still maintains a larger total sales base (just under $35 billion).
What reasons did Wesfarmers give for Coles' improved sales momentum?
Wesfarmers' CEO Richard Goyder credited better customer experience — friendlier, more open stores, shorter queues, more engaged staff and an improved fresh offer — as well as Coles' tie-up with TV show MasterChef Australia, for boosting sales. Coles also signed a new two-year exclusive supermarket sponsorship deal with the show.
What does Coles' turnaround mean for Wesfarmers shareholders and the company's $19 billion acquisition?
The stronger Coles performance has helped ease investor concerns about Wesfarmers' $19 billion purchase of Coles, showing the turnaround is gaining traction. Goyder stressed there are opportunities beyond the original five-year plan and that the business can provide long-term growth for shareholders, while noting more work remains.
How did Wesfarmers' other retail brands (Kmart, Target, Big W) perform in the period?
Kmart and Target recorded flat growth for the year. Target reported a 4.4% decline in fourth-quarter sales but still outperformed Woolworths' key merchandise and apparels business, Big W, according to the article.
How significant was Bunnings' contribution to Wesfarmers' results?
Bunnings, described as the 'jewel' in Wesfarmers' earnings crown, delivered full-year sales of $6.41 billion, up 10.4%, with fourth-quarter sales of $1.465 billion, up 6.9%.
How did the market react to Wesfarmers' update on Coles and the group's results?
Wesfarmers shares rose about 3.2%, closing at $30.08 after the company reported the stronger Coles performance and solid results from other divisions.
What longer-term outlook did Richard Goyder give for Coles and Wesfarmers' retail businesses?
Goyder moved beyond the five-year turnaround narrative, saying Wesfarmers sees opportunities for Coles and its other businesses well beyond that timeframe. He said the group is well positioned to provide growth for shareholders and stakeholders over many years, while also emphasizing there is still substantial work to be done.
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