Coles posts 8.1% sales growth in H1

Date : 17 February 2021

Nick Miles

Head of Insight - Asia Pacific

Coles has posted sales growth of 8.1% to AU$20,378m for the first half of its FY21, with EBIT also increasing 12.1% to AU$1,020m.

Supermarkets sales up 7.3% to AU$17,800m

Supermarket LFL growth was reported at 7.2% for the half and despite ongoing challenges to deal with the pandemic, customer satisfaction scores reached record highs. Growth did slow in Q2, but remained strong (Q2 LFL growth +5.0%) driven by a successful Christmas, range reviews and the growth of online. Christmas growth was supported by the introduction of more than 250 new products with particularly strong growth in fresh food categories. Customer-led range change activity continued throughout H1 with over 340 range changes across categories such as frozen meals, health foods and nutritional snacks. As well as placing over 1,400 products on everyday low prices, Coles continued to invest in value via its private label, with sales of these products growing an impressive 9.8% to AU$5.7bn. Over 1,200 new private label products were launched in the half, these included new convenience, Christmas and health-orientated solutions, such as the Coles Kitchen 'Balanced for you' healthy meals range.

Continued online and store investment

Online sales grew 48% to AU$1bn, while B2C online sales growth was even stronger at 61%. Coles continued to invest in increasing its capacity during the Victoria lockdown in Q1 and over the busy Christmas period. It also focused on improving product availability, user experience with single-click checkout and better navigation introduced, plus enhancements to its delivery route planning. As demand eased in Q2 (growth slowed to 40%) Coles reduced capacity, while it also started to see its B2B sales recover as restrictions eased. Coles also continued to invest in its stores, refreshing 30 in the half, including seven Format A stores, 10 Format C stores and two Coles Local stores. It also opened 9 net new supermarkets.

Liquor sales up 15.1% to AU$1,946m

Strong liquor growth continued in H1 with LFL sales up 15.1% and good performance right across the business, especially online and larger stores. As in Supermarkets, liquor growth was marginally slower in Q2, but remained strong (Q2 LFL growth +13.1%). Coles continued to simplify its operating model, as well as invest in service and team capability. Range changes were rolled out across key growth categories in Liquorland stores, while a further 126 local product lines were launched during the half. Online sales grew 90% in H1, aided by three new darkstores, one each in Victoria, Queensland and Western Australia. Investment in the network continued with 15 net new store openings, new Liquorland and Vintage Cellars format trials expanded to more sites and the continued conversion of First Choice Liquor Market stores, with the latest design now across 70% of stores.

Express sales up 10.5% to AU$632m

Express stores continued to trade well, with LFL sales growth of 9.9% in H1. Investment in new fridges and range reviews in the drinks category, with more healthier alternatives introduced helped drive growth, alongside increased forecourt traffic and store footfall, plus strong tobacco sales. The roll out of new self service coffee machines across the network was completed, helping drive a strong uplift in coffee sales. Categories such as food-to-go and confectionery previously impacted by COVID-19 also bounced back. Coles opened 10 net new Express stores during H1.

Growth will slow significantly in H2

The outlook for H2 FY21 will depend on multiple factors, however what is likely is that Coles' sales growth will moderate and most likely decline from later Q3 onwards and into FY22 as it cycles some strong comparative trading periods from last year. Sales have already started to moderate at the start of Q3, but with performance significantly varying by state, store location and even by week, due to COVID-19 outbreaks and measures. Despite the slightly bumpy road ahead, Coles will continue to invest in its business for long term growth. This will include; renewing around 65 stores and opening 15-20 new supermarkets during the year, continuing to focus on its refreshed liquor strategy, Coles Local acceleration, plus investing in online and operational efficiencies.



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