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“The greatest test of our lifetime”: Coles boosts profit despite Covid-19

A Coles store in Adelaide.
A Coles store in Adelaide.

Coles has reporting profit growth for the first time in four years – up 7.1 per cent to $951 million – despite the impact of Covid-19 crisis. 

Coles reported earnings before interest and tax (EBIT) growth of 4.7 per cent to $1.76 billion across the group in FY20, despite significant losses in Coles Express and high costs as a result of the pandemic.  

Coles CEO Steven Cain said 2020 had provided the “greatest test” with drought, bushfires and the Covid-19 pandemic bringing unprecedented challenges. 

Coles’ convenience business suffered a $16 million loss during the year, as lockdowns reduced foot traffic; while the pandemic added costs of $170 million in Q4 related to cleaning, security and labour.

However, the retailer benefited from strong demand at its supermarkets throughout the year. 

Supermarkets sales were $33 billion for the year, an increase of 6.8 per cent on FY19, with comparable sales growth of 5.9 per cent. 

Online proved a key area of growth for Coles, with the retailer almost doubling capacity through the roll out of contactless Click & Collect, the launch of Coles Online Priority Service (COPS) and a relaunch of and all three liquor businesses’ websites.

Coles Online sales grew by 18.1 per cent for the year despite a temporary disruption to services at the height of stockpiling in March and April.

“Despite the significant drag on profitability as a result of the temporary suspension, online contributed a modest profit to Supermarkets for the year,” the retailer said on Tuesday. 

Coles Own Brand accounted for more than $10 billion in sales for the year, growing by 9.7 per cent, and contributing 31.2 per cent of Supermarkets sales in Q4.

Over 1850 new products launched during the year, including the Coles Asia and Coles Mexico ranges, Daley Street premium range of Columbian and Kenyan arabica coffee beans and Coles Kitchen and Coles Finest convenience ranges.

Liquor also enjoyed strong growth, despite consumers seeking healthier low- and no- alcohol alternatives. Liquor sales surged by 20 per cent in the fourth quarter.

“A large proportion of the sales increase was down to people being at home rather than out at pubs and clubs,” Cain said on a media call. 

While Cain said supermarket sales have remained strong for the first six weeks of FY21, Covid related costs are expected to remain high. 

“I don’t think anyone knows what’s going to happen in six months’ time,” Cain said.

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