Keeping things simple and focusing on productivity have been listed amongst the reasons for Coles successful first quarter financial results in the 2016 financial year.
Parent company Wesfarmers reported strong results for most of its retail investments including Bunnings Warehouse, Officeworks, Kmart and Target.
The group’s results however dropped when comparing last year’s petrol sales to current figures because of lower petrol prices.
Coles Managing Director John Durkan also acknowledged that even though its liquor transformation was producing promising results, further work was required.
Food and Liquor – Coles, First Choice Liquor, Liquorland
Combined, food and liquor sales were $7.6 billion, up 4.7 per cent on the previous corresponding period.
Coles Managing Director, John Durkan, said focusing on productivity and simplicity along with lowering prices, improving fresh offers and increasing customer service levels were all key to the growth.
“Customers responded positively to continued strong price investment, and this was evident in the growth in volumes, transactions and basket size recorded during the quarter,” Durkan said.
“Our absolute focus remains on delivering trusted value to Australian households through Every Day low prices, compelling promotions and innovation in Coles Brand. Customers are unwavering in their feedback that they want great prices, not just on key lines but across the product range, combined with great customer service, and this is exactly what we’re determined to deliver right across Australia,” Durkin said.
Wesfarmers continued with its liquor transformation with promising results and growth as a result.
“The customer experience within Coles Liquor continued during the quarter, and reflected the work completed over the past 12 months,” Durkin said.
“Whilst the early improvements are encouraging, more work needs to be done to improve the range, value proposition and store network,” Durkin said.
Petrol and convenience – Coles Express
Petrol and convenience store investments, via ‘Coles Express’ were one of the few areas where Wesfarmers did not perform well this quarter. Sales were $AUD1.8 billion, a decrease of 7.8 per cent on the previous corresponding period.
Wesfarmers attributed the drop to low fuel prices with convenience sale purchases outside of petrol increasing by 1.4 per cent. The Coles Express store network was expanded with four new stores taking total store numbers up to 666.
Home improvement – Bunnings Warehouse
Total sales for the quarter were up 11.6 per cent amounting to $2.5 billion. According to Wesfarmers, the growth came from all product areas and all key trading regions.
“Our work creating more value, improving experiences and extending our brand reach is resonating well with consumer and commercial customers,” Gillam said.
Office supplies – Officeworks
Total sales for the quarter were AUD$429million, up 6.5 per cent on the previous corresponding quarter. The sales growth occurred both in-store and online.
Gillam said the results were a continuation of the past three successful years for the office supplies chain.
“Officeworks continues to drive its ‘every channel’ strategy by providing customers with a unique one-stop shopping experience anywhere, anyhow, anytime,” Gillam said.
“Investments made over the past two to three years to enhance the physical and digital offers, combined with investments in new and expanded ranges and the customer service proposition, all contributed to the positive sales growth,” said Gillam.
Department store retailing – Kmart and Target
Retail arms, Kmart and Target, profits both increased on last year’s corresponding quarter.
Kmart total sales were AUD$1.1 billion, an increase of 12.5 per cent. Managing Director for the chain, Guy Russo, said sales grew in all areas of the store, however home, kids and clothing experienced the best results. New and made over stores also performed especially well. During the quarter, ten store makeovers were performed and one new store opening occurred.
“In July, we completed a Price Drop campaign to reduce prices on everyday products across the range, and notwithstanding the challenge of a weakening Australian dollar, we invested in dropping prices again in October to keep our prices irresistible for customers,” said Russo.
Target sales were $776 million, a 3.1 per cent increase. Target Managing Director Stuart Machin put the sales increase down to taking an everyday low-prices that does not compromise on quality approach. Similar to Kmart, clothing performed well and online sales grew by 53 per cent within the quarter.
“We are on track with our transformation plan and are making satisfactory progress, but with more still to do,” said Target Managing Director Stuart Machin.
“We will continue to listen to our customers and invest in lower prices as we make fashion, style and quality more affordable for the whole family, every day,” Machin said.
