After rebates that weren’t rebates and fresh bread that wasn’t fresh, Coles is in hot water again over fresh spring apples that went into storage last autumn. It might seem like the Wesfarmers (ASX: WES)-owned retailer can’t take a trick at the moment, but the real truth is revealed at the checkout: in the three months to 30 September, Coles’ food and liquor sales rose a whopping 5.8% from a year earlier, and 4.3% on a like-for-like basis. And it’s unlikely to have been at the expense of margins, with price deflation of just 0.5%.
Meanwhile, archrival Woolworths (ASX: WOW) could muster just 3.9% headline growth from Australian food and liquor, or 2.1% on a like-for-like basis – less than half that achieved by Coles – and this was despite price deflation of 2.0%. Coles’ like-for-like growth has now outperformed Woolworths’ for 21 consecutive quarters.
Investors in Woolworths shouldn’t be unduly alarmed – it’s a well-run company that will be taking note of the performance of its major competitor, which has the advantage of coming from a low base. With a fully franked dividend yield of over 4%, its shares are also reasonably priced.
But don’t be fooled by the headlines about Coles’ marketing mishaps. These are the signs of a revitalised retailer pushing the boundaries – and for every slip-up it’s kicking plenty of goals.