Big Hit Little Shop Campaign Fuels Coles’ Sales In September Quarter

The supermarket giant Coles flags comparable sales growth of 5.1% for the first quarter of fiscal 2019, as it succeeded in capturing the Australian’s attention to its campaign of swapping and sharing miniature, ‘Little Shop.’

The total sales for the three months ended 30 September 2018 has gone by 5% to $9,838 million at the back of strong growth in basket size, jump in number of transactions and units sold, and upswing over fresh market share.

Where Coles’ supermarkets sales hit $7,657 million, 5.8% increase compared to previous corresponding year’s $7,239 million, the sales of Liquor division jumped 2.1% to $744 million in Q1 FY19. Wesfarmers told that improvement in Coles’ supermarkets revenue is driven by promotional campaigns like ‘Little Shop’, ‘flybuys’ and enhancement over in-store execution. Launched in July this year, the flybuys campaign promoted ban of one-time plastic bags usage by rewarding flybuys points to customers if they bring their own bags. Â

Coles Managing Director Steven Cain stated that since the start of FY19, the Coles team aimed to transform customers’ life easier.

But on the challenging side, the Coles supermarket business has witnessed cost pressure in its key fresh categories underpinned price inflation of 0.6% for the quarter. Further, its prices in bakery items and meat category has been adversely affected during the reporting period due to surge in grain cost and lower supply of livestock as a result of the drought.

However, the comparable sales for liquor division has gone up by 1.3% ahead of advancing the liquor network with 21 store renewals in September quarter. With the opening of five stores and closing of five stores during Q1 FY19, total retail liquor sites of Coles accounted to 900 while hotels 87 as at 30 September 2018.

Coles also succeeded in expanding its footprint in digital space as its online sales grew 30% in September 2018, which positions it to be on track to achieve the target $1,000 million sales for the current financial year. Â The management informed that over 1,000 Click & Collect locations were rolled out across the network in past three-month period.

Whereas on the convenience store front, Coles Express reported $1,437 million sales for Q1 FY19, up 2.5% on the prior corresponding period. This reflects an improvement to the overall food to-go offering and Coles’ convenience range. But to the contrary, fuel volumes have reduced during the quarter impacted by higher oil prices and change in commercial terms with Alliance partners.

These results may be the last results under the roof of parent Wesfarmers as Coles underway to separate from Wesfarmers and become the independently listed company on ASX. On Coles’ demerger, Wesfarmers’ shareholders will reportedly receive 1 Coles share for every Wesfarmers share held and it is expected to be completed by November 2018, subject to shareholder and other approvals.

According to the top management of Wesfarmers, the revamping of the entire portfolio would help in achieving robust growth for Coles and Wesfarmers.

It seems after observing such an improvement in Coles’ performance, investors are not in favor to Coles’ separation from Wesfarmers as WES share price plunged 0.317% to close at $47.180 on 15 October 2018. However, over the past one year, the stock has witnessed a performance change of +12.69%.

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