Coles Group releases 2021 full year results

Coles’ sales revenue increased by 3.1% to $38.6 billion with e-commerce sales reaching $2.1 billion. The retailer experienced sales growth in Q4 of 2.1% in supermarkets, 7.1% in liquor and 1.2% in express.

Coles Group CEO Steven Cain says: “In February, we said the short-term outlook would be dependent upon the efficacy and pace of the vaccination program. Six months on, government forecasts are pointing to a more normal outlook from early in calendar 2022 including the longer-term prospect of increased migration.

“From a strategic perspective we have delivered a second year of far-reaching change, to begin creating a differentiated omnichannel Coles with more unique products, increased use of data, a leading e-commerce offer and investment in technology capability throughout the business.

“We have also progressed the roll out of successful new formats with Coles Local and Liquorland, and launched our new Together to Zero and Better Together sustainability strategy – all built around longer-term relationships with our supply partners.

“As we approach the half-way point of our transformation program, with strong foundations in place, and increasing investment in the business, I expect the pace of change at Coles to continue to accelerate to meet the changing demands of our customers and opportunities in the marketplace.”

Supermarket update

Supermarkets sales revenue was $33.8 billion for the year, an increase of 2.6% on the prior corresponding period, with comparable sales growth of 2.5%, and 8.4% on a two-year basis. For the fourth quarter, sales revenue increased by 1.7% and comparable sales growth was 2.1%. On a two-year basis, supermarkets headline sales growth in the fourth quarter increased to 9.4% compared to 6.8% achieved in the third quarter, while two-year comparable sales growth in the fourth quarter increased to 9.2% compared to 6.7% achieved in the third quarter.

Sales growth was supported by successful value campaigns throughout the year including ‘Helping lower the cost of breakfast, lunch, dinner and entertaining’, successful execution across the MasterChef cookware and knives campaigns and strength in e-commerce, according to the retailer.

“While consumer behaviours began to normalise at the end of the third quarter and into the fourth quarter, increased in-home consumption as a result of Covid-19 positively impacted sales revenue growth throughout the year. Normalising consumer behaviours in the fourth quarter supported improving transactions as customers shopped more frequently, while basket sizes moderated, albeit are above pre- Covid-19 levels,” says Coles.

Customer satisfaction, as measured by Tell Coles, improved by 2.6 percentage points compared to the prior year, with improvements across the key pillars of availability, range and price.

E-commerce sales grew 52% to $2 billion in FY21 as more consumers shifted towards purchasing online, in part as a result of Covid-19 lockdowns, says the company.

“A number of improvements were made in the end-to-end online customer experience during the year including in the areas of digital experience, platform stability, expanded range and availability, delivery in full and on time, and improved customer support. As a result, online NPS almost doubled compared to the prior year,” says Coles.

Coles Online also invested in its network adding 249 delivery stores and upgraded more than 100 Click & Collect locations.

“A number of new services were added in the year including same day home delivery, Click & Collect Rapid (order to pickup in 90 minutes), and Coles Plus membership subscription offer. Monthly active shoppers increased 46% compared to the prior year and customer retention improved,” says Coles.

Coles continues to make progress against its Inspire Customers strategic pillar, delivering trusted value and a tailored offer.

Through the use of advanced analytics, 30% of store layouts have now been tailored to ensure the right range is in the right store, the retailer said.

“Investments in technology and processes have also enabled an increase in customer range activity with more than 650 range changes conducted during the year, an increase of 23% on the prior year,” says Coles.

These range changes have brought more innovation to stores with initiatives such as the introduction of ‘Free From’ in cereals and sugar free soft drinks, creating healthier options for customers. In addition, a net 474 new products were placed on everyday low prices during the year.

From FY21, Coles reports on Coles Own Brand and Exclusive Proprietary Brand sales under the new banner ‘Exclusive to Coles.’ Exclusive to Coles products delivered $10.9 billion in sales during the year, an increase of 5%, says the company.

Coles continues to inspire customers with new innovations and brands, with over 2100 new Coles Own Brand products launched during the year.

Coles completed 65 renewals during the year including 10 Format A and 36 Format C and four Coles Local stores. Coles now has 41 Format A, 69 Format C and nine Coles Local stores across the network with four Coles Local stores in Sydney, four in Melbourne and one in Brisbane. For the year, 20 new openings and 10 closures were completed. At the end of the period there were 834 Supermarkets.

“Gross margin increased by 35 bps to 25.9% driven by strategic sourcing and Smarter Selling benefits such as supply chain and loss prevention initiatives,” says Coles.

“These were partially offset by Covid-19 costs as well as additional business continuity costs at the Smeaton Grange distribution centre.”

EBIT for the year increased by 5.2% to $1.7 billion and EBIT margin improved by 13 bps to 5.0%.

Convenience update

Convenience store sales revenue was $1.2 billion for the year, an increase of 7.7% on the prior corresponding period, with comparable convenience store sales growth of 6.8%, and 11.4% on a two-year basis, according to the retailer.

For the fourth quarter, convenience store sales revenue increased by 2.2% and comparable convenience store sales growth was 1.2% relative to the prior corresponding period.

On a two-year basis, Express headline sales growth increased to 10.8% in the fourth quarter compared to 13.2% achieved in the third quarter, while two-year comparable sales growth in the fourth quarter increased to 9.4% compared to 10.6% achieved in the third quarter.

“Sales growth was largely driven by food-to-go (including coffee) and cold drinks, supported by recent investments in new self-serve coffee machines and fast-lane fridges, as well as benefits from the range review implemented in the drinks category in the prior year,” says the company.

“Forecourt and tobacco sales also contributed to growth for the year, although exited the year in decline whilst cycling elevated sales associated with Covid-19 as the business benefited from lower CBD footfall and the closure of tobacconists in the prior corresponding period.”

Strategic investments were made in the Express network, including renewing over 80 sites together with its Alliance partner. During the year, 13 new sites were opened and nine closed, taking the total Express network to 717 sites.

Fuel volumes declined by 4% during the year with comparable fuel volumes declining by 5.4% driven by Covid- 19 restrictions impacting traffic flows, says Coles.

“Average weekly fuel volumes of 57.1mL per week were recorded during the year. For the fourth quarter, average weekly fuel volumes were 59.0mL per week, broadly flat quarter-on-quarter with volume growth late in the quarter impacted by lockdowns,” says Coles.

“Gross margin decreased by 134 bps to 52.4% largely due to declining fuel volumes and lower fuel margin income, partially offset by strategic sourcing benefits. CODB as a percentage of sales improved by 404 bps to 46.7% largely due to strong focus on cost control throughout the year and higher sales fractionalising Express’ fixed cost base.”

Strong convenience store sales and cost control supported an increase in Express EBIT to $67 million with EBIT margin increasing by 270 bps to 5.7%.

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