The March quarter saw a solid performance by Coles Group (ASX:COL), the country’s number 2 supermarket chain behind Woolworths.
A dip in grog sales in the three months to March (reversing a small rise in the six months to December) and expectations that it will continue this year offset the investor reception for Coles Group’s March quarter sales performance and what was a solid outcome for its core supermarkets business.
In fact, the concern about the dip in alcohol sales and worries about cost of living pressures that the weaker performance of liquor effectively clouded a small uptick in growth in supermarkets – even as inflation again eased.
The bottom line from the release is that despite all the criticism and showboating from politicians and others, Coles delivered further strong sales growth during the three months, thanks to the supermarkets business.
Group sales revenue from continuing operations rose 6.4% to $10.033 billion for the quarter, reflecting the 5.1% jump in supermarkets sales to $9.065 billion, and the 1.9% decline in liquor sales.
The supermarket performance was just ahead of the 4.9% lift in sales for the December half-year and a 1.8% rise for liquor.
The extra trading day in February and the earlier timing of Easter (right at the end of the quarter no doubt helped the performance in supermarkets – but not in liquor, so it seems.
Coles CEO, Leah Weckert, was upbeat about the performance in Tuesday’s release.
"We have delivered another solid sales result across our supermarkets this quarter reflecting strong execution of our trade plans and our continued focus on delivering great value and great quality alongside improved availability.
"We have also seen a meaningful increase in customers interacting with our digital platforms and loyalty programs which is allowing us to engage on a more personalized basis with these customers.
"I'm also pleased to report that we are delivering on our commitment to address loss (that’s through measures to control theft or ‘shrinkage at stores and in the supply chain) with a positive trajectory throughout the quarter.”
In supermarkets, the 5.1% growth in topline sales was supported by an inflation-beating 4.2% rise in comparable (or like-for-like) store sales, which is always a positive for retailers and analysts.
Coles said that excluding tobacco, supermarket sales revenue increased by 6.6% over the prior corresponding period – no sign of any consumer boycott, as urged by some politicians and critics of the retailers.
Coles said its momentum from the first half continued into the third quarter thanks largely to the successful execution of the Summer value campaign. As well, this was supported by well-executed trade events in-store and online.
Another key to its success was its focus on exclusives. Its Exclusive to Coles (a growing range of own brands) revenue increased by 8.8% to $3.1 billion with strong volume growth. The portfolio continues to outgrow proprietary products on a volume and sales basis as consumers seek value. That’s around a third of all supermarket sales.
Also helping was a slight easing in inflation. Coles said that total Supermarkets price inflation reduced to 2.2% in the third quarter (3.0% in 2Q24) as a result of moderating inflation in packaged coupled with deflation within the fresh (food) category.
Liquor sales revenue fell 1.9% on a topline basis to $786 million for the third quarter and comparable sales fell by a nasty 3.1% which was inevitable of the negatives for investors on Tuesday.
Looking to the final quarter of the June 30 year, Coles said the supermarkets business has seen a "positive" start to the fourth quarter but liquor is expected to continue being impacted by subdued discretionary spending.
Across the group, Coles online businesses are doing well. The retailer said eCommerce sales jumped 34.9% to $856 million in the quarter with penetration (share of total sales) growing to 9.3% in the third quarter.
"Strong sales were delivered across both Home Delivery and Click & Collect propositions. The delivery of key seasonal events, an ongoing focus on targeted customer offers and strong growth in Coles App monthly active users of 44.1% underpinned sales growth."
