Coles continues to gain on its bigger supermarket rival, posting better sales growth than Woolworths and taking advantage of a pre-Christmas strike of Woolies warehouse workers.
Coles estimated it gained $120 million (US$74.5 million) in additional sales and $20 million (US$12.4 million) in earnings during the industrial action in late November and early December after its quick response.
Coles on Feb. 27 said after the industrial action was announced in late November, it worked with suppliers to increase the availability of products to stores in Victoria and New South Wales (NSW) and added team members.
Woolworths indicated on Feb. 26 supermarket sales in Victoria had not yet fully recovered from the strike, which ended in December, suggesting some shoppers had switched their loyalty to Coles.
Coles’ supermarket sales rose 4.3 percent to $19.8 billion (US$12.3 billion) in the first half, while Woolworths supermarket sales climbed just 2.7 percent to $26.7 billion (US$16.6 billion).
Coles said its new state-of-the-art automated distribution centres in Kemps Creek, NSW, and in Redbank, Queensland, showed their value during the industrial action of Woolworths workers, ramping up quickly to support warehouses in Victoria.
“It was particularly pleasing to see benefits realised from our capital investments in automation, data and technology which allowed us to respond to the spikes in demand experienced during the half in a way that would not have been possible previously,” said Coles chairman James Graham, who announced his retirement on Feb. 27.
Those investments in modernising Coles’ supply chain meant the company’s profit slipped slightly in the first half, but sales were up and it will pay a higher dividend.
Coles made a $576 million (US$357.9 million) profit in the 27 weeks to Jan. 5, down 2.2 percent from a year ago, as it spent $92 million (US$57.1 million) on dual-running costs during the warehouse transition, up from $46 million (US$28.6 million) a year ago.
Its underlying profit, which excludes those expenses, was up 6.4 percent to $666 million (US$413.8 million). Group sales rose 3.7 percent to $23 billion (US$14.3 billion), with earnings up 5.0 percent to $1.1 billion (US$0.7 billion).
“We had a strong focus on value, fresh quality and availability, which has supported volume-led growth in supermarkets during the half,” group CEO Leah Weckert said.
In August, Coles opened its second automated distribution centre in Kemps Creek, NSW—about 40 kilometres west of Sydney’s CBD—on a mammoth site about the size of 25 rugby league fields.
The chain has plans to build a third automated distribution centre, in Truganina, 22 kilometres west of Melbourne’s CBD.
This $880 million (US$546.8 million) facility will have 15 percent more capacity than automated warehouses in Kemps Creek and Redbank, Queensland.
The project will begin in 2025 and take up to five years to complete, Coles said.
E&P retail analyst Phillip Kimber said the profit result was better than expected and Coles had continued to execute strongly.
Coles announced former Scentre Group CEO Peter Allen would replace Graham as company chairman effective May 1.
In the first seven weeks of the second half, supermarket sales were up 3.4 percent and liquor revenue up 3.8 percent, Coles said.
It will pay an interim dividend of 37 cents per share, up 2.8 percent from a year ago.
Coles shares on the ASX closed up 3.5 percent to $20.38 (US$12.66) on Feb. 27.
Woolworths shares gained 0.3 percent to $30.70 (US$19.08), recovering a bit from their 3.0 drop on Feb. 26 after the company released its financials.
