Coles brands and campaigns help deliver 49th consecutive quarter of growth

Yet solid results tempered after ASX-listed supermarket and liquor chain announces it's aside $20 million to cover staff underpayments

Campaigns and own brand innovation has helped Coles record sales revenue increase of 3.3 per cent in its latest half-yearly results. Yet the results have been tempered by an impairment charge of $20 million to cover staff underpayments.

The ASX-listed retail giant reported a 49th consecutive quarter of supermarkets comparable sales growth for the 27 weeks to 5 January 2020, increasing to 3.6 per cent in Q2. The Express business also had a comparable fuel volume growth of 4.2 per cent, its first consecutive quarters of positive growth in six years. 

Coles the solid result down to various campaigns, including Little Shop and its more recent Spiegelau European glassware promotion, as well as a successful first year of 'Winning in our Second Century' strategy, with reported progress on trusted value, new health and convenience ranges, and tailored store formats.

The 'Good things. Great value.' campaign focused on lowering the cost of breakfast, lunch, dinner and Christmas entertaining, while collectibles continued to resonate with many Australian consumers thanks to Little Shop 2 in Q1.

Another strong performer was Coles’ Own brand, which achieved sales in excess of $1 billion in December and grew by 6 per cent in the first half. Twenty-six Own Brand products received product awards during the half including the triple layer Coles Drip Cake, Coles Crackling Ham, Coles Finest sourdough rolls by Laurent, Ash Brie and Coles Green Choice Bathroom Cleaner.

Supermarkets sales revenue was $16.6 billion for the half, an increase of 3.3 per cent on the prior corresponding period, with comparable sales growth of 2 per cent. For the second quarter, Supermarkets sales revenue increased by 4.8 per cent and comparable sales growth was 3.6 per cent. Coles reports the comparable sales growth was driven by both increased basket size and transaction growth.

Also highlighted in the half-yearly result was Coles' contribution to the recent Australian bushfire crisis. Coles has collected and contributed more than $6 million for the bushfire relief up to February 2020, including $3 million in gift cards to support 6000 rural fire brigades across the country, over $3 million in donations to the Red Cross, as well as more than 170 pallets of food, water and essentials for distribution to communities and emergency services both directly and via Foodbank. 

“Australians always come together in times of adversity. This included many Coles team members who have been able to help support the emergency services, communities and suppliers, and navigate the disruption caused by the devastating drought and bushfire emergencies to ensure that we maintain food supply," Coles CEO, Steven Cain, said. "I am pleased, in the release of our first-half results, that we have delivered our demerger dividend commitments and are making clear, early progress on our strategy execution, particularly in Supermarkets.” 

Tell Coles customer satisfaction increased to 88.5 per cent in the second quarter, up from 87.8 per cent in Q4, 2019, on the back of an increased investment in check-out customer service.

Yet while the results were strong, these were tempered by a pay disparity uncovered across several Coles team members when compared to the General Retail Industry Award (GRIA). Today, Coles announced it has set aside $20 million in back pay, interests and costs to rectify the disparity across both its supermarket and liquor businesses, estimated to affect up to 1 per cent of total team members.

This includes $4 million to cover underpayments to approximately 5 per cent of salaried Liquor managers, and $16 million so far for approximately 5 per cent of supermarket managers.

On the digital side, Coles Online achieved sales revenue growth of 24 per cent on the prior corresponding period and is now 4 per cent of Supermarkets sales revenue. The roll out of an additional 142 click and collect locations and home delivery supermarkets, and the launch of ‘Delivery Plus’, the new subscription program to drive customer loyalty, all contributed to increased sales. Sites have now been identified for the two Ocado customer fulfilment centres (CFCs) in Sydney and Melbourne.

Follow CMO on Twitter: @CMOAustralia, take part in the CMO conversation on LinkedIn: CMO ANZ, follow our regular updates via CMO Australia's Linkedin company page, or join us on Facebook: https://www.facebook.com/CMOAustralia.

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