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Leading Australian retailer, Coles Group Limited (ASX:COL) made an announcement today (i.e., 24 January 2019) stating that it had executed definitive contracts with WITRON Australia Pty Ltd for the development of two new automated ambient distribution centres. Despite this news, the share price of the company decreased by 1.83 percent as on 24 January 2019 (AEST 1:21 PM)
One of the distribution centres will be located at Redbank in south-west Brisbane, for which the company has entered into an agreement for lease catering with Goodman Group. Another distribution centre will be located at Kemps Creek in western Sydney, and for that the company has entered into agreement for lease catering with a joint venture of Goodman and Brickworks Limited. Â
It is expected that the total capital expenditure relating to Colesâ supply chain modernization project for the two automated distribution centres will be around $950 million over six years.
Today Brickworks also announced the first lease pre-commitment for Oakdale West Industrial Estate in Kemps Creek. The lease will be for a 66,067m2 22 to 34m high bay facility on 18.7 hectares of land with a 20-year term. The agreement is subject to approval from DA and various other associated approvals and has a target practical completion date in January 2022.
The agreements with WITRON Australia, Brickworks and Goodman are subject to the satisfaction of certain property related conditions precedent including development approvals.
As per Coles CEO Steven Cain, with the signing of these important contracts, Coles is one step closer to implementing a key element of its supply chain modernization strategy. He further told that the distribution centres will provide a safer working environment for the companyâs team members, lower supply chain costs. Moreover, the distribution centres will enhance the companyâs overall business competitiveness.
In the announcement, the company also informed that it will recognize a pre-tax provision of $146 million in its 2019 interim result as a significant item, relating to lease exit costs and redundancies for existing distribution centres that will be closed over a five-year period. In the first quarter of 2019, Coles total sales increased by 5 percent to $9,838 million. The supermarket division of coles recorded $7,657 million of sales which was 5.8 percent higher than the first quarter of FY 2018.
In the liquor division of Coles, the company reported $744 million worth of sales which was 2.1 percent higher than the Q1 of FY 2018. During Q1 2019, Coles opened 5 new stores and closed 5 stores to improve its liquor network. In the convenience division, the company reported 1,437 million worth of sales which are 2.5 percent higher than Q1 2018.
Meanwhile, in the last one month, the share price of the company increased by 7.61 percent as on 23 January 2019. COLâs shares traded at $12.360 with a market capitalization of circa $16.79 billion as on 24 January 2019 (AEST 1:21 PM).
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