Coles profits up as consumers skimp on eating out

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Supermarket giant Coles has thanked cost-of-living pressures for contributing to a 4.8 per cent rise in profit.

Organised crime, however, is increasingly threatening the retailer’s bottom line.

Coles on Tuesday reported supermarket sales revenue for the last financial year grew by 6.1 per cent with cash profit rising to $1.1 billion from $1.05 billion the year before.

Customers felt a 6.7 per cent bump in check-out prices for the year, but new chief executive Leah Weckert says Coles is well placed for growth as more people choose to eat at home.

“Eating out, takeaway and coffees from the cafe are increasingly being seen as treats for a special occasion,” she told analysts.

Ms Weckert is pleased headline inflation has moderated but there is large price variation across categories.

Fresh produce prices – including for cucumbers, broccoli and capsicum – are deflating rapidly, while inflation of bakery and dairy products continues unabated.

Sales of own brand products grew strongly, including staples like pasta and rice as well as premium end lines.

“Customers are still looking to have a treat and a restaurant quality meal and are increasingly looking to supermarkets to do more with their budgets,” Ms Weckert said.

Coles’ gross margin increased to 26.4 per cent, boosted by reduced COVID-19 costs, technology-driven cost-cutting initiatives, growth in Coles 360 and lower tobacco sales.

ACTU assistant secretary Joseph Mitchell said it was little wonder that  supermarkets are the most complained about industry to the ACTU’s call for information regarding price gouging.

“The public have been told that supply chain issues and inflation are to blame for the cost-of-living crisis,” Mr Mitchell said.

“But when you see the profits like those posted today, it is legitimate to ask whether Australia’s big supermarkets have used the cost-of-living crisis as a smokescreen to push up their profit margins, despite costs decreasing for themselves.”

Organised crime challenge

An industry-wide surge in shoplifting by organised criminals contributed to a 20 per cent increase in stock losses at Coles.

“We’re certainly seeing a lot more reports coming through from stores where they see a loss that is quite large and targeted,” Ms Weckert said.

Coles is looking to address the issue by stepping up security guards at stores as well as initiatives such as trolley locks and smart gates.

E&P Capital retail analyst Phillip Kimber said the profit result was two per cent lower than consensus expectations and will likely weigh on the share price.

Weak growth in the second half of the financial year, complicated by increased costs associated with delays in setting up two automated customer fulfilment centres, implies downside risks to earnings forecasts, Mr Kimber said.

Liquor sales revenue was flat for the year at $3.6 billion with ready-to-drink products the strongest performing category.

Overall group sales revenue from continuing operations grew 5.9 per cent to $40.5 billion and earnings before interest and tax lifted 1.8 per cent to $1.9 billion.

Coles delivered a fully-franked final dividend of 30c per share to bring its full-year dividend to 66c.

– with AAP

Topics: Coles
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