Coles warns of falling sales as COVID sugar hit wears off

Supermarket giant Coles has warned its sales could decline over the remainder of the year as the COVID-19 sugar hit to the sector begins to wear off thanks to the vaccine rollout and a reduction in stimulus payments.

The $24 billion retailer warned investors on Wednesday its purple patch of bumper sales, brought on by pandemic panic buying, could be coming to an end, with sales for the first six weeks of the new year growing just 3.3 per cent, well below the 20-30 per cent monthly growth rates Coles was reporting earlier in the pandemic.

Coles has warned supermarket sales could fall in the coming year.Credit:Jacky Ghossein

“Depending on COVID-19, vaccine rollout and efficacy, and other factors, sales in the supermarket sector may moderate significantly or even decline in the second half of FY21 and into FY22,” the supermarket warned.

Coles’ warning comes as the supermarket reported another six months of bumper growth up to the end of December last year, as COVID restrictions in most states eased and Christmas sales performed strongly.

Total revenue at the business rose 8.1 per cent to $20.4 billion, and comparable sales at Coles’ key supermarkets division jumped 7.2 per cent. Net profit after tax rose 14.5 per cent to $560 million.

The company progressed further with its plan to cut $1 billion in costs out of the business by 2023, with Coles saying it was on track to deliver more than $250 million in cost savings by the end of the 2021 financial year, despite incurring $105 million in COVID-related costs over the half.

“We have now delivered the first 18 months of our refreshed strategy whilst ensuring that we support our team members, customers, suppliers and community partners through a volatile and unpredictable COVID-19 year,” chief executive Steven Cain said.

“Whilst COVID-19 will continue to present challenges it will also continue to present opportunities for change. With a strong balance sheet and team, Coles is well placed to continue delivering on our vision of becoming the most trusted retailer in Australia and grow long-term shareholder value.”

This result is Coles’ first without any hangover from its $20 billion demerger from Wesfarmers in 2018, as previous results have been either directly impacted by the spin-off or compared against Coles’ performance under the conglomerate.

The retailer has also been focused on growing its online sales, which appear to be on track to do $2 billion in sales for the 2021 financial year, growing 48 per cent across the company.

Coles declared a dividend of 33 cents per share, up 10 per cent on the prior corresponding half.

More to come

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