Sales growth at Coles started to slow last quarter

Photo: Quinn Rooney/Getty Images.

Market leader Coles supermarkets is seeing a slowing in sales growth.

The big supermarket chain today reported a rise in headline sales of 2.9% to $7.9 billion in the September quarter, despite increased competition and slower market growth. But this was slower than the full year 5.8% reported in August.

A short time ago, shares in Wesfarmers, the parent company of Coles, were down 3.4% to $42.45.

Main rival Woolworths is due to report its sales on Friday. However, its latest results show flat sales growth and little prospect of a rise in the near term.

Both Coles and Woolworths report price deflation — the price tags on goods on shelves keep falling — as they fight to keep customers from shifting to discount chains such as Aldi.

Today Coles’ parent company Wesfarmers said comparable food and liquor store sales increased 1.8% for the first quarter of the 2017 financial year.

This was a slower growth rate than the latest full year where like-for-like sales were up 4.1%. Headline food and liquor sales for the year were up 5.8% to $32.56 billion.

Coles Managing Director John Durkan says the comparable sales growth is satisfactory and current market conditions confirm the importance of a customer-led strategy.

“Coles now has approximately 4,000 items on Every Day value as we continue to lower the cost of the weekly shop, and fresh remains a key sales driver as fresh participation growth accelerated through the quarter relative to the prior year,” he says.

“In our food business, we have seen a change in market conditions over the past year. Market growth has slowed, while at the same time there has been an increase in competitive intensity. Despite these changes in market conditions, our focus on the customer will not waver.”

Food and liquor price deflation eased to 1% for the quarter compared to 1.7% for the full year.

For Wesfarmers as a whole, first quarter retail sales were up 5.1% to $14.965 billion.

The company reported 7.4% sales growth to $2.659 billion at Bunnings Australia and New Zealand. In the UK and Ireland, sales were £320 million ($A554 million), in line with expectations for the newly acquired business Homebase.

Kmart was up 11.2% to $1.249 billion, but sales fell 17.1% to $643 million at Target.

Managing director Richard Goyder says the sales performance of retail businesses, with the exception of Target, built on the strong growth achieved in the same period last year.

“The group’s retail businesses will continue to invest in customer value, service and store networks, as well as improve product ranges and digital capabilities to deliver sustainable growth over the long-term,” he says.

Wesfarmners says Target is making significant changes to its operating model which will take time to implement.

Here’s a summary of the sales report:

Source: Wesfarmers

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