Meanwhile, Coles earnings for the half year have slipped 2.6 per cent to $920 million as its sales growth slows further amid heavy grocery discounting led by Woolworths.
“Coles’ decline in earnings was driven by lower margins following increased investments in value, which were weighted towards the second quarter, including through the absorption of cost price increases in meat,” said the conglomerate’s outgoing MD Richard Goyder in a statement to the ASX. “Costs of doing business were well managed, partially offsetting lower gross margins.”
Food and liquor comparable sales, which strips out one-off events, rose 1.3 per cent in the six months to December 31, much slower than the 4.3 per cent growth recorded in the same period a year ago.
Coles’ results were unveiled by its parent company today, along with strong performances from the group’s other retailers, Bunnings, Kmart and Officeworks, which helped lift the conglomerate’s total half-year profit by 13.2 per cent to $1.58 billion. Wesfarmers said the business will be retained if “divestment options do not its valuation hurdles”.
Goyder said Coles’ earnings have been hit by lowering grocery prices amid intense competition and the pressure of higher meat costs.
The supermarket giant’s sales’ slowdown may be a sign arch-rival Woolworths’ aggressive price cuts has helped it wrest back customers.