Coles Q1 highlights slowdown

Date : 26 October 2016

Coles has released Q1 sales for FY17, with total sales declining 0.3% to AU$9,399m, however food and liquor sales continued to grow, with convenience causing a drag on total performance.

Food and Liquor sales up 2.9% to AU$7,850m

LFL sales grew 1.8% in the quarter, marking a considerable slowdown from the 4.9% and 2.8% recorded in Q3 and Q4 of FY16, respectively. Despite the slowdown, Coles' managing director, John Durkan, commented that the sales growth was satisfactory, given that the market as a whole has slowed, whilst at the same time there has been an increase in competitive activity.

Customer focused strategy remains key

Coles remains focused on its customer focused strategy and continued to cut prices in the quarter with approximately 4,000 SKU's now in its Every Day campaign. Ongoing improvements to fresh food also saw participation growth accelerate during the period. Coles also continues to improve its store network, opening four supermarkets in Q1 and closing three, plus refreshing nine stores. Coles plans to renew 50 stores in FY17, this is in contrast to 80 that Woolworths has planned.

Liquor recovery on track

Coles will be delighted that the performance of its liquor business continues to improve, with LFL sales growing for the fourth consecutive quarter. The majority of this improvement is attributed to the performance of its Liquorland stores. Coles will continue to drive better prices and ranges via its liquor formats, plus rework the network, with eight new stores and four closures in Q1.

Convenience sales decline 13.7% to AU$1,549m

The decline in sales was driven by lower fuel volumes and declining prices. On a more positive note, convenience store sales continued to grow, with sales up 7.4% and 3.2% on a total and LFL basis. Sales growth, as in previous results statements, was attributed to improvements in food-to-go and the extension of Every Day prices into its convenience stores. Coles also noted that the declining fuel volumes were a result of competitors upgrading their sites and opening new locations faster, with Coles only opening two new sites in Q1.