Cheap chickens, toothpaste and tissue have helped Coles get better-than-expected grocery sales, in a push to win over customers from arch-rival Woolworths.
Coles owner, Wesfarmers CEO Richard Goyder, said the group has been ramping up its investment into lower prices each quarter, including price drops in roast chicken, Colgate toothpaste and Kleenex tissues.
Coles splashed out about $150 million on lowering food and liquor prices during the first quarter. The hefty price investment have driven its comparable food and liquor sales up 4.9 per cent to $7.5 billion.
This is higher than market expectations of 4.5 per cent comparable growth, and considerably better than the 3.8 per cent recorded in the same quarter a year ago.
Analysts said the stronger-than-expected same-store sales growth is proof that Coles continues to steal market share from Australia’s largest supermarket network, Woolworths.
Bell Direct equities analyst Julia Lee said how much Coles’ lower prices have cost in profit remains to be seen.
“It looks like Coles has gained market share versus Woolworths with Coles’ market share probably getting closer to that 29 per cent mark,” Lee said.
“But the question is at what cost?”
Goyder said competition was stiff and the expansion of German discounter Aldi was hurting.
“Aldi’s expansion into South Australia had an immediate effect but that is stabilising,” he said. “Woolworths has certainly promotionally been investing more in recent times.”
Elsewhere in the business, Bunnings continues to impress with comparable sales lifting 8.3 per cent, while Kmart’s comparable sales rose 15.2 per cent.
Officeworks also recorded comparable sales growth, while Target’s adjusted comparable sales dipped 0.8 per cent.
