Wesfarmers bullish on Coles recovery

Posted by Daniel Palmer on 25th September 2009

Wesfarmers has reaffirmed to investors that the Coles turnaround is progressing as planned in their annual shareholder review.

Chairman Bob Every said that, long-term, the company was confident that the oft-maligned Coles business could match it with the best retailers in the world, not just Australia.

“It has been particularly pleasing to see the Coles, Kmart and Officeworks turnarounds gathering momentum,” he told shareholders. “The opportunity for Coles is not simply to move to best practice Australian retailing but to transform the business so that it can match anything being achieved globally.”

“With teams of world-class retailers leading these businesses and a clear strategy based on performance and customer focus, the signs are – as we approach the end of the second year of our five year turnaround timeframe – that we are on the way to creating significant, long-term value for our shareholders.”

Wesfarmers Managing Director, Richard Goyder, echoed Mr Every’s sentiments regarding the progress at Coles and labelled the fresh food offering and private label areas as two where they believed much growth could be obtained.

“The Coles turnaround continues to gather momentum with the benefits of the major restructuring, disciplined management and greater customer focus becoming apparent,” he stated. “The… results are in line with our expectations, reflecting fundamental improvements in areas such as supply chain and store format, product availability and freshness.”

Store-on-store growth in the Coles food and liquor businesses rose to 7.3 per cent in the last quarter of FY2009 and was 4.6 per cent for the full-year, compared with 2.8 per cent for the nine months of ownership in 2007/08. They still lag market leader Woolworths, however, after years of chronic underinvestment.

“In last year’s Annual Report, published about the time the world’s economy took its first big hits, I referred to our plans for the Coles group of companies aimed at ensuring that this acquisition would prove, over time, very beneficial to shareholders,” Mr Goyder continued. “Twelve months on, and still obviously at an early stage in the five year turnaround process, my confidence in our ability to achieve that objective has been reinforced. The challenges of completing the required transformation remain but the performance to date has been very encouraging.”