Costco has posted a profit as it eats into Australia's supermarket business

Photo: Getty Images.

Costco, the US-based warehouse shopping club nibbling away at the market dominance of Coles and Woolworths, has reported strong sales and profits in Australia.

Sales reached $1.3 billion in 2015, six years after entering Australia, according to a report by Fairfax Media. Pretax profit was $22.7 million in the year to August 31 compared to a loss of $10.7 million in 2014.

Fairfax Media quoted accounts lodged with ASIC as showing revenue grew by 50% to $1.323 billion from its eight stores.

While the revenue growth, with the opening of two new stores, was strong, the level is still a long way from that of Coles and Woolworths.

Woolworths, reporting flat results and forecasting the same for the next six months, still had food and liquor sales of $11.064 billion in the first three months of 2016.

It’s forecasting profit to fall 28% to 35% in the first half of 2016 but that still represents between $900 million to $1 billion.

Aldi, the discount chain, is making a deeper cut into Australia’s supermarket business. Aldi employs about 9000 people and has doubled its revenue since 2010 to about $6 billion a year.

The German chain, now estimated to have 11% of the Australian market, has a target of 25 new stores on the eastern seaboard in 2016.

And its short-term expansion plans will see up to 20 stores open in both South Australia and Western Australia.

The supermarket operator said the investment for Western Australia and South Australia is $700 million. Long-term expansion plans will see up to 120 new stores across those states.

Aldi currently has 396 stores nationally, less than half the 961 at Woolworths but more than halfway to catching Coles at 776.

The new entrants to the market have much more efficient operating models, using less floor space and less staff. According to Deutsche Bank, Aldi employs 24 staff per store in Australia compared to the 110-120 at Woolworths and Coles stores.

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