Coles good results based on finding the key ingredient is customer value
Turnover revenue for Coles was $38.20 billion and return on capital was 11 per cent up 67 bps.
The results contributed to an overall $2.44 billion net profit after tax for the 2015 financial year for the parent group Wesfarmers, down from 2014’s $2.69 billion.
Comparable food and liquor sales increased by 3.9 per cent with the directors attributing this to price cutting and good service. There was particular good growth in Coles fresh produce with Wesfarmers reporting double-digit sales growth.
The Liquor division
Liquor continued to be a problem area for Coles but Wesfarmers say previously announced transformational plans are already showing promise.
Coles convenience stores also saw a fall in revenue due to low petrol volumes and prices.
Store sales were however reported as offering a better range of products, especially in the ‘food-to-go’ category across the year, Coles convenience stores also started offering more ‘value’ products through the 2015 Financial Year.
Wesfarmers acknowledged that competition will continue to be tough within the supermarket sector with customers always seeking better value. The company said it would continue to focus on providing more value for customers along with further investment in the Flybuys loyalty program and further development of its online shopping platform.
The supermarket will continue to roll-out is transformation plans for its liquor stores.
Bunnings had a successful year with store-on-store sales up 8.8 per cent. Wesfarmers reported that the hardware chain saw solid sales growth in all areas across all major regions.
The successful results were attributed to good trading, productivity improvements and cost discipline.
Moving into the 2016 financial year Wesfarmers stated that similar to Coles there will be a focus on providing value for customers.
The company expects it will open between 15 – 18 new Bunnings stores over the next two years.
Officeworks also provided positive results for Wesfarmers across the 2015 financial year with a $118 million in profits before interest and tax. This equalled a 14.6 per cent increase on last year’s profits.
Wesfarmers said that improved service both in-store and online, investing in upgrading store layouts, and introducing new and growing product lines all helped create the boost in profit.
Westfarmers said the stationery and office supplies sector will be competitive moving forward, However, the store will be investing in its online presence and continuing to expand its product ranges.
Kmart and Target
Kmart saw comparable store sales increase by 4.6 per cent. Wesfarmers said that its sales growth was due to a range of factors including its store makeovers with 29 occurring across the year.
Moving forward Wesfarmers is hoping for further positive results through its low prices, enhanced product range and online marketing efforts. The company is also planning 40 new store makeovers in this current financial year. n
Target produced a profit of $90 million, up 4.7 per cent on last year. Wesfarmers stated its transformation plan for the chain will be entering a ‘Growth and efficiency’ stage in the future and that customer value and experience will be amongst key considerations.
Drag factor from Wesfarmers Resources, Wesfarmers Industrial and Safety
As Managing Director Goyder acknowledged Wesfarmers was finding conditions difficult in its industrial, safety and resources divisions. Earnings before interest and tax in the Resources division fell 61.5 per cent while and its Industrial and Safety businesses profit fell 46.6 per cent.
Goyder said that the environment was tough for these industries which resulted in the profit losses but Wesfarmers had been managing costs and looking to grow these business investments.
Chemical, Energy and Fertiliser businesses profit rose by 5.4 per cent.