On the release of its 1H24 results, Coles CEO Leah Weckert says the retailer makes around $2.60 for every $100 spent. While there is a lack of understanding about the costs of getting a product onto the shelf, Weckert says the company has the balance right.
Weckert said there has been a lot of noise about the relationship between suppliers and supermarkets, but that’s not playing out in conversations between Coles and its more than 8000 suppliers.
Snapshot
- Group sales revenue: $22.21bn, up 3.7% pcp;
- Supermarkets sales revenue: $19.78bn, up 4.9% pcp;
- Liquor sales revenue: $1.98bn, up 1.8% pcp;
- Group EBITDA: $1.85bn, down 2.8% pcp; and
- NPAT: $589m, down 8.4%
Weckert was commenting on the pressure supermarkets have been under regarding pricing and supplier relationships, while announcing the supermarket group’s 1H24 results.
The group recorded a net profit of $594 million, up 3.6 per cent on the prior corresponding period (pcp). Group earnings before interest, taxes, depreciation, and amortisation (EBITDA) was $1.854 billion, up 2.5 per cent pcp.
Weckert said highlights included 7.6 per cent sales revenue growth in its home brand Exclusive to Coles, and Exclusive Liquor Brands up 3.6 per cent pcp.
More than 500 Exclusive to Coles and 199 Exclusive Liquor brand products, as well as the Coles Simply brand were launched in the first half.
There was also a strong performance by ecommerce, digital, and loyalty, with ecommerce revenue up 29.2 per cent in Supermarkets and 14.9 per cent in Liquor. The Coles App experienced 42.3 per cent growth in active users and Flybuys active membership up 9.5 per cent. Coles 360 media income was up 29.2 per cent.
“We make around $2.60 for every $100 a customer spends – less than 3c on the dollar. And that margin has now been stable for at least the last five years. It has not gone up as we have seen inflation come through.
“We understand the cost-of-living pressures that many of our customers face, such as higher rent, mortgage, energy, and other household bills… Over the last six months, we lowered the prices of hundreds of products through our ‘Great Value, Hands Down’ campaign and we delivered additional value through a wide range of Exclusive to Coles products, weekly specials, and our Flybuys loyalty program,” Weckert said.
“Profits are an essential thing for any business, enabling us to employ 120,000 people, support 8000 suppliers and pay a very large tax bill – we’re one of the top 100 taxpayers in Australia. Then there are shareholders, including hundreds and thousands of mum and dad shareholders and millions of people through our inclusion in super funds,” she said.
The grid build was completed at both ecommerce customer fulfillment centres (CFC) in Wetherill Park, New South Wales, and Truganina, Victoria. Weckert said the revised timeline for the Victorian CFC (which has suffered a $120 million blow-out and 12-month delay on being commissioned) is on track with rectification works being completed ahead of schedule. Wetherill Park is in the process of seeking regulatory approvals as the grids are complete and the facility has been commissioned.
The Redbank Automated Distribution Centre (ADC) ramp up was completed (Redbank is the largest ADC in the southern hemisphere) and the Kemps Creek ADC is on track to receive inbound deliveries in March, Weckert said.
Major project implementation costs were $46 million for the half, up from $17 million pcp.
Weckert also said there is also a lack of understanding or recognition that more goes into the cost of setting a price for a product than the price on the shelf, starting from the initial ingredients through processing and manufacture, and logistics to the people putting it on the shelf.
She said there were two main contributors to the positive result – customers responding to the value campaigns it has been running, and better availability.
“This time last year we had real issues with the availability of water, soft drinks, chicken, and eggs. Having a supply issue with water and soft drinks in summer is not ideal. This year we have been in a better position,” Weckert said.
Woolworths was also running a kids collectible campaign in 1H23 while this year Coles is running a collectible campaign with Pokemon.
