Coles first quarter sales up but deflation continues in the liquor sector
Wesfarmers Limited today announced its retail sales results for the first quarter of the 2013 financial year, with Coles’ comparable food and liquor sales up 3.7 per cent for the quarter. Coles overall sales were up for the quarter, in spite of continuing deflation in the liquor sector.
Headline food and liquor sales for the first quarter of the 2013 financial year 1 were $6.6 billion, up 4.9 per cent on the previous corresponding period. Coles Managing Director Ian McLeod said investment in lower prices remained a key focus during the quarter, including the ongoing ‘Down Down’ campaign, resulting in further strong volume growth.
Despite the growth of Coles overall, Coles liquor sector has continued to experience food and liquor price deflation of 3.2 per cent during the quarter as a result of investment in lower prices and ongoing fresh produce deflation. Coles has now had food and liquor price deflation for 12 of the last 13 quarters.
“Our focus on delivering stunning quality fresh food also stepped up during the first part of the year including the launch of our new “Helping Australia Grow” campaign. Volume growth of fruit and vegetables remains strong and we’ve employed 100 more bakers in our stores over the last year in support of baking more fresh bread every day.
“Whilst Liquor remained a drag on our reported sales growth, we remain encouraged by more recent underlying performance, particularly growth in wine sales, which has supported a rebalance in the sales mix,” Mr McLeod said.
Mr McLeod said the rollout of key business initiatives continued during the quarter, with a new state-of-the-art distribution centre in Truganina now servicing stores in Victoria. During the quarter Coles opened one new supermarket and closed three supermarkets, resulting in a total of 747 supermarkets. Eleven stores were also refurbished during the period, with 264 stores now in renewal format at the end of the quarter. Refurbishment and new store activity is planned to increase in the lead up to Christmas.
Six new liquor stores were opened and 10 stores were closed during the period as Coles continued to improve its liquor store network, resulting in a total of 788 liquor stores at the end of the quarter.
Total Coles Express sales, including fuel, for the quarter1 were $1.9 billion, an increase of 1.9 per cent on the previous corresponding period.
Comparable fuel volumes increased 0.4 per cent during the quarter, following record fuel volume growth in the prior comparable period. This volume growth reflected continued strength in the Coles Express quality fuel offer. Headline fuel volumes increased 1.8 per cent during the quarter.
Convenience store sales, excluding fuel sales, declined by 0.1 per cent for the quarter, while comparable store sales declined 2.9 per cent.
Coles Express opened five new sites and closed two during the quarter, bringing the total store network to 630 sites.
Total sales for the quarter of $1.8 billion were 4.7 per cent above the previous corresponding period. Total store sales for the quarter grew 5.1 per cent, while store-on-store growth was 2.5 per cent.
Sales growth was achieved in both consumer and commercial areas across most key trading regions. This was pleasing given the business was cycling the strongest growth period of the prior financial year and experienced deflation from ongoing investment in price.
John Gillam, Managing Director of Home Improvement and Office Supplies, said store transaction growth remained robust, reflecting a positive customer response to the ongoing evolution of the Bunnings offer.
“Good progress continues to be made on key strategic initiatives, particularly in service, merchandising and our supply chain”, Mr Gillam said.
During the quarter three Bunnings Warehouses and three smaller format stores were opened. A further 11 sites were under construction at the end of September, with a strong pipeline of store openings scheduled for the next 24 months.
Total sales for the quarter of $362 million were 0.3 per cent above the previous corresponding period. In line with Officeworks’ “every channel” strategy, online sales recorded strong, double digit growth for the quarter, while store sales declined by 0.2 per cent.
Mr Gillam said the business was working hard to improve its “every channel” offer to customers in order to offset challenging trading conditions. Expanding and renewing the store network while continuing to invest in the online offer remained key areas of focus. Westfarmers said the business also continues to make good progress in expanding its presence in the B2B segment of the market.
During the quarter five Officeworks stores were opened.
Total sales of $853 million for the quarter were 2.2 per cent above the previous corresponding period, with comparable store sales declining 4.1 per cent.
Target Managing Director Dene Rogers said the underlying sales trend continued to improve, particularly in the homewares, footwear and intimate apparel categories. Comparable store sales declined as a result of bringing forward the timing of the mid-year Toy Sale into June and also the strategy to improve promotional effectiveness which affected sales.
“Customer numbers were higher during the quarter as our mid-tier position was strengthened through better marketing, improved service levels, further expansion of the Target essentials range and growth in the online offer.
“We will continue to seek to improve the profitability of promotions and identify new ways to offer value to our customers,” Mr Rogers said.
During the quarter Target opened three new stores.
Total sales of $956 million for the quarter were 3.1 per cent above the previous corresponding period, with comparable store sales increasing 2.2 per cent.
Kmart Managing Director Guy Russo said sales growth for the quarter was achieved through improved product availability, better ranging and a positive customer response to ongoing investment in lowering prices on everyday items.
“The Kmart team is fully committed to providing the lowest possible prices for Australian and New Zealand families,” Mr Russo said.
“Customers continued to respond positively to the wide range of everyday items at low prices, and this has been reflected in the eleventh consecutive quarter of growth in transactions and units sold.
During the quarter, Kmart opened two new stores and completed three store refurbishments.
Kmart Tyre and Auto opened four new stores and closed one store.