Coles Surges Ahead of Woolies, Takes Advantage of Rival’s Setback

Coles is continuing to make progress against its larger supermarket competitor, achieving better sales growth than Woolworths and seizing the opportunity presented by a strike of Woolies warehouse workers just before Christmas.

During the industrial action in late November and early December, Coles estimated that it gained an additional $120 million (US$74.5 million) in sales and $20 million (US$12.4 million) in earnings due to its prompt response.

On Feb. 27, Coles disclosed that after the announcement of the industrial action in late November, it collaborated with suppliers to enhance product availability in stores in Victoria and New South Wales (NSW) and recruited additional team members.

Woolworths indicated on Feb. 26 that supermarket sales in Victoria had not fully recovered from the strike that ended in December, implying that some customers had shifted their loyalty to Coles.

During the first half, Coles’ supermarket sales increased by 4.3 percent to $19.8 billion (US$12.3 billion), while Woolworths’ supermarket sales only climbed by 2.7 percent to $26.7 billion (US$16.6 billion).

Coles mentioned that its new state-of-the-art automated distribution centers in Kemps Creek, NSW, and Redbank, Queensland, demonstrated their value during the Woolworths workers’ industrial action by swiftly ramping up to assist warehouses in Victoria.

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“It was particularly satisfying to witness the benefits derived from our investments in automation, data, and technology, which enabled us to respond to the demand spikes experienced during the period in a way that was not feasible previously,” stated Coles chairman James Graham, who announced his retirement on Feb. 27.

Despite a slight decline in profit in the first half due to investments in modernizing its supply chain, Coles’ sales increased, resulting in a higher dividend payout.

Coles reported a profit of $576 million (US$357.9 million) in the 27 weeks ending on Jan. 5, down by 2.2 percent from the previous year, with dual-running costs during the warehouse transition amounting to $92 million (US$57.1 million), up from $46 million (US$28.6 million) a year ago.

Excluding these expenses, underlying profit rose by 6.4 percent to $666 million (US$413.8 million). Group sales grew by 3.7 percent to $23 billion (US$14.3 billion), and earnings increased by 5.0 percent to $1.1 billion (US$0.7 billion).

“Our emphasis on value, fresh quality, and availability has fueled growth in supermarkets driven by volume during the period,” noted group CEO Leah Weckert.

In August, Coles launched its second automated distribution center in Kemps Creek, NSW, and has plans to construct a third one in Truganina, west of Melbourne’s CBD.

The new $880 million (US$546.8 million) facility in Truganina will have 15 percent more capacity than the existing automated warehouses in Kemps Creek and Redbank, Queensland, with construction set to commence in 2025 and take up to five years to complete.

Retail analyst Phillip Kimber from E&P expressed that the profit outcome surpassed expectations, with Coles demonstrating continued strong performance.

Peter Allen, former CEO of Scentre Group, was announced to succeed Graham as the company’s chairman effective May 1.

In the initial seven weeks of the second half, supermarket sales for Coles rose by 3.4 percent, and liquor revenue increased by 3.8 percent.

Coles declared an interim dividend of 37 cents per share, marking a 2.8 percent increase from the previous year.

On Feb. 27, Coles shares on the ASX closed at $20.38 (US$12.66), up by 3.5 percent, while Woolworths shares saw a 0.3 percent gain to $30.70 (US$19.08), recovering slightly from a 3.0 drop on Feb. 26 following the release of the company’s financial results.