Coles' growth piles pressure on rival
The release on Wednesday of Coles' December-quarter sales - along with stablemates Bunnings, Kmart, Target and Officeworks - provides the first glimpse of consumer expenditure over the crucial Christmas trading period, with businesses across the country hoping for a rebound in holiday spending that will flow into 2013.
"I wouldn't say it was a booming Christmas but it was a reasonably good Christmas," said Wesfarmers managing director Richard Goyder, whose Perth-based conglomerate owns Coles and a string of retail, insurance and energy concerns.
Further evidence of any recovery in the depressed retail space will emerge in coming weeks, as department stores David Jones and Myer unveil sales results for Christmas and the new year.
National retail sales figures for the December quarter will be published by the Bureau of Statistics next week.
Now under the control of Wesfarmers for five years, Coles posted same-store, or comparable, food and liquor sales growth of 3.9 per cent for the second quarter, amid slowing price deflation and a still-underperforming liquor division that dragged on the result by about 1.25 per cent.
Total food and liquor sales for the first half rose 5 per cent to $14.3 billion.
Woolworths is to release its December-quarter sales figures on Thursday and analysts predict its Australian supermarket division will post comparable sales growth of only 3 per cent, meaning Coles will maintain crowing rights in the supermarket wars.
Mr Goyder refused to claim victory in the reshaping and resurrection of Coles after years of underperformance in the hands of its previous owners.
"So far so good but there is a heck of a lot of work to do," Mr Goyder (right) said. "Coles has a lot of improvement to do, as have all of our retail businesses.
"We are never complacent in any of our businesses and there is a heck of a lot of work to do."
The result was slightly below some analyst expectations and Wesfarmers shares fell 69¢ to $38.13.
"There will be a very strong and renewed focus in all of our retail businesses to make sure we get our customer offer right, cost base right and we continue to innovate and create value for stakeholders - our customers, our suppliers, our staff and, clearly, our shareholders," Mr Goyder said.
Elsewhere in the business, Bunnings once again proved its market power, with headline quarterly sales up 6.6 per cent to $2.198 billion. Target sales dropped 0.6 per cent to $1.27 billion, as Kmart quarterly sales rose 3.8 per cent to $1.4 billion.
Frequently Asked Questions about this Article…
Coles reported a healthy 5% jump in second-quarter sales to $7.71 billion and recorded its 15th straight quarter of same-store sales growth. For the second quarter, same-store food and liquor sales rose about 3.9%, although an underperforming liquor division reduced the result by roughly 1.25%.
Coles’ stronger-than-peer sales indicate it is winning market share in the supermarket wars, with total food and liquor sales for the first half up 5% to $14.3 billion. For everyday investors, this signals improving trading momentum at Coles under Wesfarmers’ ownership, but management cautioned there’s still ‘a heck of a lot of work to do.’
Wesfarmers’ Bunnings continued to show market strength with headline quarterly sales up 6.6% to $2.198 billion. Kmart’s quarterly sales rose 3.8% to $1.4 billion, while Target sales fell 0.6% to $1.27 billion. Officeworks was mentioned as part of the group’s stable but specific figures weren’t provided in the article.
Analysts expected Woolworths’ Australian supermarket division to post comparable sales growth of about 3% for the December quarter, which would be below Coles’ reported comparable growth and leave Coles with the short-term edge in comparative sales performance.
Wesfarmers shares fell 69 cents to $38.13 after the sales result came in slightly below some analyst expectations, despite solid performance at Coles and Bunnings. Management stressed ongoing work to improve customer offer, cost base and value creation across its retail businesses.
Richard Goyder described the Christmas period as ‘reasonably good’ rather than booming. He emphasised that while results are ‘so far so good,’ the company is not complacent and intends to keep focusing on improving customer offers, costs and innovation across its retail businesses.
National retail sales figures for the December quarter were scheduled to be published by the Bureau of Statistics the week after the article. Department stores David Jones and Myer were also expected to unveil their Christmas and new-year sales results in the coming weeks, offering more insight into consumer spending.
Investors should watch upcoming national retail data from the Bureau of Statistics, sales updates from Woolworths, David Jones and Myer, and future quarterly updates from Wesfarmers’ retail brands. Key indicators include comparable (same-store) sales growth, performance of liquor and discretionary divisions, and commentary from management on customer offers and cost control.
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