Coles grows comparable sales amid ‘promotional fatigue’

Coles-supermarket2Coles’ latest collectable campaign, Fresh Stikeez, was a major factor in the 2.4 per cent increase in comparable sales it saw in the 12 weeks to March 24, 2019, with sales reaching $7.2 billion, up from $7 billion in the previous corresponding period for a relatively strong Q3 for the newly independent Coles Group.

According to Coles Group chief executive Steven Cain, the business delivered its 46th consecutive quarter of comparable sales growth.

“We know that customer expectations are changing faster than ever, and we are resolutely focused on delivering our Fresh Tomorrow strategy,” Cain said.

The supermarkets new strategy involves an improved online offering, as well as implementing new store formats – such as the Coles Local store opened in Melbourne in November.

While the Stikeez campaign did draw in shoppers, it wasn’t as effective as Coles’ earlier Little Shop campaign, which Cain attributed to a general sense of ‘promotional fatigue’ in the market.

Coles’ sales increase was also driven by its growing adoption of private-label products, with the sales growth rate in this segment being “several times the rate of overall growth”.

Private-label sales growth was driven primarily by an increase in new product availability, with the supermarket having launched over 190 private-label products during the quarter.

Coles grew its online sales by 27 per cent, reaching over $1 billion on a rolling 12-month basis, due to an increased focus on improving profitability through the channel as well as a larger focus on click-and-collect, which is growing at a faster rate than home delivery options.

In terms of overall growth, Cain wouldn’t specify an exact growth rate for click-and-collect, but noted it was “north of the average.”

Convenience store sales in the group’s Coles Express offering grew by 1.5 per cent, but comparable sales were down 0.5 per cent. Additionally, the business’s food-to-go products continued to be Express’ strongest performing category.

Coles’ liquor segment saw comparable sales growth of 3.5 per cent, though this number fell to 0.9 per cent when adjusted for New Year’s Eve, which underperformed for the sector.

Liquorland struggled with a subdued market and lower promotional intensity in the beer category, with spirits being the strongest performer for the quarter.

The group converted another 19 First Choice stores into its updated First Choice Liquor Market format, with these stores seeing almost double the rate of sales compared to non-converted stores. A further 10 conversions are planned for Q4.

Cain said customer satisfaction had remained “broadly steady relative to the second quarter”, and noted it is “certainly something we can improve on.”

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