Sales on the rise at Coles

Posted by Daniel Palmer on 21st April 2009

The Coles turnaround continues to gather momentum, with their third quarter food and liquor sales up 7.6% to $5.3b. After an adjustment for the late Easter third quarter sales rose by 8.3%, with comparable store sales up 6.6%.

Comparable store sales growth for the company over the first three quarters suggests real progress is being made. In the first they managed just 1.3 per cent, while in the second sales grew by 3.8% – both paling in comparison to the 6.6% Easter adjusted figure. More importantly, they managed to outstrip the rate of inflation* for the first time this financial year, something their major rival – Woolworths – has managed every quarter.

Are they making ground on their competitors?

Based on the growth rate this quarter their relinquishing of market share appears to have subsided. They still trail Woolworths – who last week reported comparable store sales of 8.8% after the Easter adjustment – but the gap in sales growth has shrunk dramatically since the first quarter when Coles’ meagre comparative store sales growth of 1.3 per cent failed to come close to the 6 per cent growth announced by Woolworths. Coles then managed to make some inroads in the second quarter, with growth of 3.8 per cent compared to 7.1 per cent, with today’s results suggesting last month’s forecast by Citi Investment Research – that the growth rate of Coles could eclipse that of Woolies by 2010 – might not prove such a stretch.

More to be done

Despite the rapid improvement, Coles boss Ian McLeod and Wesfarmers Chief Executive Richard Goyder have both maintained that a full recovery will still take five years.

“We are seeing improvement in many aspects of the business, but … a lot remains to be done,” Mr Goyder told analysts this morning.

Phase 1 remained “on track” but there are many complex issues to fix, Mr McLeod concurred.

“It takes time to improve a supply chain,” Mr McLeod said. “We’re starting to get better but I still think we have a long way to go.”

* Inflation for the quarter was 4.4%, according to Woolworths