Wesfarmers reaffirms confidence in Coles, October sales strong

Posted by Daniel Palmer on 11th November 2009

Wesfarmers, one of Australia’s largest companies and owner of the Coles Group, has reiterated their belief that the Coles acquisition will prove a great buy in the long-term.

The underperforming Coles business has begun to show signs of life in the past couple of quarters as the new management team drives efficiency improvements. And, while they are not yet where they want to be, the conglomerate is adamant that their five-year plan is right on schedule.

Coles store design

“I do want to reaffirm the Board’s confidence in our ability to extract for you, our owners, some really significant long-term benefit from the Coles Group acquisition,” Chairman Bob Every told shareholders at their Annual General Meeting yesterday.”As Trevor Eastwood said last year, Coles was a business that had been severely underperforming and had great potential for improvement.”

“Twelve months further down the track, we acknowledge the ongoing challenge of transforming this badly neglected, but still great, Australian brand name over the next few years. But it is so very pleasing to be able to report that the turnaround is on track, that it is meeting our expectations.”

Mr Every said he was hopeful shareholders could see the improvement for themselves at their local outlet and expects that improvement to escalate in the next twelve months.

He added that the recent appointment of Archie Norman to an advisory role was quite a coup for the business.

“Archie’s a bit of a legend in global retailing having taken the Asda grocery chain in the United Kingdom from virtual bankruptcy to a very profitable operation in the 1990s. Our Board will benefit greatly I’m sure from Archie’s regular presence at meetings and his availability at other times to provide advice,” he said.

Managing Director of Wesfarmers, Richard Goyder, echoed similar sentiments, noting “impressive progress in the turnaround” – including four straight quarters of volume growth in food and liquor and an improved fresh food performance.

“It is nearly two years since we acquired Coles and our turnaround plan is on track,” he maintained.

“We recently updated the market on Coles’ sales performance for the first quarter of the financial year with comparative sales growth of 6.1 per cent. This was despite some issues in regard to a promotional programme in July and August. Since those issues have been resolved, trading has continued positively through October.”

Despite advising that the sales momentum had continued in October, Mr Goyder warned that further progress will take time.

“There is an enormous amount of work to do by the Coles team to build a sustainable world class retailing business, and we will continue to focus on making good, long-term decisions in order to achieve that goal but, as I said, I feel that we are very much on the right track,” he concluded.