Wesfarmers’ boss sees strength in private label, Coles “on track”

Posted by Daniel Palmer on 28th July 2009

Coles owner Wesfarmers has advised that the turnaround is progressing as planned and is expecting improved trading conditions in the coming year, as global economic data shows signs of recovery.

Chief Executive of the conglomerate, Richard Goyder, said today that growth at their Coles supermarkets would be broadly in-line with the strong results seen in the retail sector.

Last week, supermarket market leader Woolworths reported strong fourth quarter growth of 7.9 per cent in their food and liquor division.

“You’ve seen other retailers, we’re not going to be too different from that,” Mr Goyder said today at an American Chamber of Commerce in Australia luncheon, according to Reuters.

Wesfarmers has undertaken a complete overhaul of the management of Coles since taking over the supermarket chain and has seen sales begin to show signs of life in the past two quarters. The changes at the top were a key part of the early stages of what the company maintains will be a five year turnaround.

“The new retail businesses under the Wesfarmers banner have been demonstrating positive signs of the turnaround,” Mr Goyder said, according to Bloomberg. “We are on track in terms of where we believed we would be at this point.”

The conglomerate is planning to spend $1 billion annually to help offset a lack of investment in the chain in the years leading up to the acquisition in late-2007. Their investment will still trail Woolworths, however, who expect to spend around $2 billion a year.

“Coles had not been managed well for a long time,” Mr Goyder noted. “We were very clear when we took over the company that a sustained turnaround would take five years and we have never waivered from that.”

He added that the company had received a boost from private label sales in the past year, with the revamp of their products instigating a double-digit rise in sales of house brands. And this is set to continue, with Mr Goyder suggesting they “expect them to remain strong.”

Wesfarmers’ full year results are due out on August 20.