Coles lower prices boost third quarter results for Wesfarmers

Posted by AFN Staff Writers on 29th April 2015
Coles lower prices boost third quarter results for Wesfarmers
Coles lower prices boost third quarter results for Wesfarmers

Wesfarmers Limited has announced “pleasing” retail sales result of $13 billion for the third quarter of the 2015 financial year, which it said were boosted by Coles’ lower prices strategy and continued growth from hardware business Bunnings.

“The focus of our retail businesses to provide increased value to customers through ongoing reinvestment of productivity improvements into lower prices and better service continued during the quarter,” said Richard Goyder, Wesfarmers Managing Director.

Coles

Food and Liquor

Coles headline food and liquor sales for the third quarter were $7.1 billion, up 5.4 per cent on the previous corresponding period. Food and liquor sales for the financial year to date increased 5.4 per cent to $22.9 billion.

Coles reported comparable food and liquor store sales increased 3.8 per cent and comparable food store sales increased 4.5 per cent for the quarter. For the financial year to date, comparable food and liquor store sales increased 4.0 per cent and comparable food store sales increased 4.7 per cent.

After adjusting for the later timing of Easter in the 2014 financial year, both comparable food and liquor store sales and comparable food store sales for the quarter were 40 basis points lower. Coles experienced food and liquor price deflation of 1.0 per cent during the quarter, bringing food and liquor price deflation to 0.8 per cent for the financial year to date, reflecting continued investment in lower prices partially offset by a tobacco excise increase and meat cost price increases as a result of tighter supply conditions and increased overseas demand.

Coles Managing Director John Durkan said the sales result reflected Coles’ “continued commitment to lower prices while offering quality fresh food”.

“We are constantly seeking new ways to invest in lowering the cost of shopping for Australians”, Mr Durkan said. “During the quarter, Coles lowered the prices of over 150 items as part of its Every Day Value program, including household staples such as bread, cheese, sugar and rice,” he said.

“Following the completion of the quarter, Coles’ focus on supporting innovation in the Australian food and grocery industry continued with the announcement in April of the Coles Nurture Fund,” Mr Durkan said.

Coles said it continued to “improve and optimise” its store network, opening six supermarkets and closing two supermarkets during the quarter, leaving a total of 775 supermarkets at the end of the quarter. At 31 March 2015, 500 supermarkets were in the “renewal format”, representing 65 per cent of the fleet.

Liquorland’s ‘Low Price’ campaign drove increased customer numbers and volumes in the quarter but Coles said this growth was more than offset by price reductions.

Liquor continued to reset its range and reshape its store network, with eight new liquor stores opened, eight closed and one hotel also closed during the period. At the end of the quarter, Coles had a total of 853 liquor stores and 90 hotels.

Convenience stores

Total Coles Express sales, including fuel, for the quarter  were $1.6 billion, a decrease of 16.6 per cent on the previous corresponding period driven by lower fuel prices which more than offset higher fuel volumes. Total sales for the financial year to date  decreased 9.4 per cent to $5.6 billion.

For the quarter , headline fuel volumes returned to growth following the capping of supermarket docket discounts to a maximum of four cents per litre from 1 January 2014 now being reflected in the prior period.

Headline fuel volumes increased 3.0 per cent and comparable fuel volumes increased 0.4 per cent. For the year to date, headline fuel volumes decreased 2.3 per cent and comparable fuel volumes decreased 4.7 per cent.

Convenience store sales increased 7.7 per cent for the quarter  and 5.2 per cent on a comparable store basis. For the year to date, convenience store sales were up 10.3 per cent and up 7.2 per cent on a comparable store basis. Convenience store sales continued to grow strongly during the quarter due to a sustained focus on improving the merchandise offer for customers.

Coles Express continued to expand its network during the quarter, opening two new sites, bringing the total store network to 654 sites.

Home Improvement and Office Supplies

Home Improvement

Total sales for the quarter were $2.3 billion, up 12.0 per cent on the previous corresponding period. Total store sales for the quarter increased 11.8 per cent, while store-on-store growth was 9.4 per cent.

For the financial year to date total sales increased 11.9 per cent to $7.3 billion. Total store sales grew 11.8 per cent in the year to date, while store-on-store growth was 9.2 per cent.

Strong sales growth was achieved in both consumer and commercial areas, across all merchandising categories and within all trading regions.

Home Improvement and Office Supplies Managing Director John Gillam said the sales performance was pleasing, maintaining the positive momentum in the business whilst taking advantage of good trading conditions.

“This is a reflection of the continuing focus on our strategic agenda of delivering more customer value, better customer experiences, extending brand reach, expanding commercial and increasing merchandise innovation,” Mr Gillam said.

During the quarter, four Bunnings Warehouses and one smaller format store were opened. A further sites were under construction at the end of March.

Office Supplies

Total sales for the Officeworks division for the quarter were $485 million, up 9.0 per cent on the previous corresponding period. The business recorded positive sales growth in stores and online.

For the financial year to date, total sales increased 8.2 per cent to $1.3 billion.

Mr Gillam said the positive trading momentum maintained within the business over a number of years was very pleasing.

“The ongoing work within Officeworks to improve the customer offer continues to produce strong results,” Mr Gillam said.

“The investment made over the past 18 months in upgrading the store network, as well as the Officeworks website, has been received favourably by customers,” Mr Gillam said. “The business remains focused on driving its ‘every channel’ strategy and strengthening its position as the one-stop shop for home, business and education customers,” he said.

During the quarter, two new Officeworks stores were opened.

Department Stores Retailing

Kmart

Total sales for the quarter were $937 million, an increase of 10.9 per cent on the previous corresponding period, with comparable store sales increasing 6.3 per cent. Adjusting for the later timing of Easter in the 2014 financial year, comparable store sales increased 5.5 per cent for the quarter.

For the financial year to date, total sales increased 6.8 per cent to $3.4 billion, while comparable store sales increased 3.5 per cent.

Kmart Managing Director Guy Russo said the strong sales growth for the quarter was driven by core ranges in home, seasonal apparel and Easter related ranges. This growth was partially offset by the continued decline within Entertainment categories including video games and DVDs.

“We continue to deliver lowest prices to families and Kmart again dropped prices on everyday items across the product range in February,” Mr Russo said. “Kmart’s focus remains on continuing to provide value to customers that exceeds their expectations,” he said.

During the quarter, Kmart completed eight store refurbishments and opened two new stores.

Target

Total sales for the quarter were $663 million, 1.6 per cent below the previous corresponding period, with comparable store sales decreasing 1.9 per cent. Adjusting for the later timing of Easter in the 2014 financial year, comparable store sales decreased 3.2 per cent for the quarter.

For the financial year to date, total sales decreased 1.7 per cent to $2.6 billion, while comparable store sales decreased 1.2 per cent.

Target Managing Director Stuart Machin said that the sales result reflected the continued transformation of the business away from a culture of over-promoting and over-ordering to one of providing customers with ‘Great Quality. Lower Prices. Every Day.’.

“As we continue to lower our prices and improve the fashion, style and quality of our product, we are seeing more customers shop with us,” Mr Machin said. “We are selling more units, but this volume growth is not yet enough to offset the investment we are making to deliver lower prices, every day,” he said.

“Positive results were recorded during the quarter in ranges where we reduced pricing early in our transformation program, such as childrenswear, with unit and transaction growth more than offsetting lower prices during the quarter,” Mr Machin said.

During the quarter, Target opened one new store and closed two stores.