Wesfarmers reveals strategies to grow Coles and other businesses
Wesfarmers has revealed its strategy for growth for the coming financial year at an investor briefing today. The strategy includes revelation of the plans for supermarket group Coles.
Coles said that since the 2009 financial year it had achieved lower prices, more targeted loyalty programs, built better supplier partnerships, rolled out new formats for its stores, and developed new categories.
The supermarket group said its growth strategy included plans to deliver a better store network, have a greater focus on fresh food, extend its “value leadership”, simplify supply chain and operations, extend into new channels and services, and transform its liquor business. Coles said its focus on fresh food would also include improved local offerings, as well as moves to build deeper, longer-term collaborative partnerships with suppliers. The strategy would involve an “Australia first” sourcing policy.
It said its growth strategies were to:
Accelerate sales density and increase space growth
Drive strong fresh food growth
Extend its value leadership
Simplify and improve its supply chain, in-store and above store operation
Differentiate Coles through new growth channels
Transform its liquor offering
Supporting Australian suppliers and extending value
Coles said it had enjoyed strong volume growth of more than 30 per cent since the 2009 financial year, and had continued to co-invest with suppliers to “secure quality and support lower prices”.
The supermarket group said around 96 per cent of its fresh fruit and vegetables were grown in Australia.
Coles said it planned to further reduce the cost of the weekly shopping basket for consumers, and to grow its Coles brand as a “compelling value alternative”. The supermarket group also detailed plans to drive targeted marketing with its ‘flybuys’ customer loyalty program and customer insights. Marketing plans will also include a strengthening of local marketing.
‘Bold’ growth online
Coles said online shopping was its “strongest growing area”, and that it planned to extend the reach and capacity of Coles Online. It said new technology was improving productivity in this channel.
Coles said its new mobile-enabled website was now live for consumers who wished to shop online from their mobile device. The expansion of the online shopping channel included wider deliver and ‘Click & Collect’ reach, as well as ‘flybuys’ integration.
Coles said all ‘Down Down’, multibuys and catalogue specials would now be available to online shoppers. The supermarket group also said free delivery would be available to shoppers who used a Coles MasterCard, and to those shopping on a Wednesday.
Transforming Liquor business
Coles said its liquor business was an “underperforming business with many growth opportunities”.
It identified problems for its liquor business such as an inferior store network; a large and confusing range; poor layout, signage and visibility within its stores; an inefficient supply chain; and a weak online proposition.
The supermarket group said it planned to reshape its liquor network, focusing on co-location and convenience offering, as well as investing in renewals and new space. Coles said it planned to rationalise and tailor its liquor range and cluster its stores by customer demographics.
Growing the convenience offer
Coles said it planned to expand its convenience offer, and improve its fuel offer. It said its “Down Down” offer would be expanded in its convenience stores across all categories, and that it would roll out ‘food and coffee benches’ for its convenience stores.
Wesfarmers Group outlook
Wesfarmers said it would continue to evaluate opportunities for value adding transactions, as well as further developing human resource capability and drive Group values. It said it would also continue to strengthen corporate infrastructure to provide effective divisional support.
Wesfarmers reported that its retail turnarounds and the growth of Bunnings had driven revenue growth, while increased productivity and operating leverage had supported strong growth in EBIT.
Interest costs had been “significantly reduced” through equity raising and successful debt refinancing strategy and its effective tax rate had increased to approximately 30 per cent (Coles acquisition reduced tax rate post acquisition).
Wesfarmers said its profit growth was approximately three times its sales growth and its cumulative operating cash flows had been $18.6 billion since FY09, with strong cash realisation achieved. It said high cash realisation was expected to continue, although it was likely to moderate.
Bunnings was reported to be positioned for continued growth via strong levels of investment and a strategic agenda to further enhance customer offer, while the focus at Kmart would be on lowest prices, category growth and investment in store network. Wesfarmers said a strengthened leadership team at Target was focused on executing transformation plan.
Planned growth at Officeworks would come through execution of an ‘Every Channel’ strategy.