Coles weathers to COVID storm

Coles’ sales revenue has remained steady this year with $20.6bn in takings for the first half of FY22 up just one per cent on the corresponding period from last year, while earnings decreased by 4.4 per cent to $975 million, due largely to Covid disruptions.

For liquor, sales revenue was $2.0b for the half, up 2.7 per cent compared to the same period last year driven by strong online sales. It is an impressive achievement during what CEO Steve Cain describes as “the most disruptive period in Coles’ history”.

Liquor sales remained elevated during the half with comparable sales growth of 1.8 per cent cycling the COVID-19 related sales growth in the prior corresponding period of 15.1 per cent and the re-opening of on-premise venues in the second quarter led to a softening of liquor sales prior to strong trade over the Christmas period.

E-commerce sales across the group grew by 46 per cent to $1.5b while liquor performed particularly strongly, growing by 60.4 per cent across an aggregated two year period and with Coles launching a fourth dark store in New South Wales to support this ongoing growth.

Coles renewed six First Choice Liquor Markets while 90 Liquorland stores were updated and refreshed with new black and white signage. Seven new liquor stores opened through the half.

Coles’ increased gross margins improved the takings at shelf and softened the $150m in business costs incurred in the first half, well up on the $105m spent during the prior corresponding period and largely attributed to COVID including team member isolation requirements, QR compliance marshalls and rapid antigen testing requirements in distribution centres.

Looking ahead, the Witron Queensland automated distribution centre (ADC) and Ocado Sydney ecommerce customer fulfilment centre (CFC) are both on track to be commissioned in 2023 although Ocado Melbourne’s ecommerce center has been delayed until FY24 due to significant delays wrought by COVID.

Ocado will provide automated fulfilment functionality through the CFCs and store pick channels while Coles will manage the online store and web presence for the intake of orders.

Coles has been ranked the second most sustainable supermarket globally (behind Tesco in first place) and established $1.3 billion in four year Sustainability Linked Loans which draw a direct line between Coles’ sustainability performance and cost of capital.

The day after Australia re-opened its borders to the world, Mr Cain said that migration is still greatly needed to fill the “clear shortage” of workers in both technology and hospitality sectors. Mr Cain said that the business has never hired more people than in the past year and that at one stage, one of its stores had 80 per cent of its staff in isolation.