Higher shelf prices underpin 3.6pc Coles first quarter sales increase

Fresh produce price increases also continued to moderate. But inflation remains elevated at 5.7 per cent primarily driven by farmgate milk prices and higher commodity prices, including cheese, eggs and oil, Coles said.

The nation’s second-largest grocer reported a 9.4 per cent increase in revenues from its own-brand products, the fourth consecutive quarter of growth, with sales reaching $3.2 billion. Customers also continued to shift to healthier options with Coles Own Brand health and lifestyle product sales growing by almost 30 per cent.

Coles Liquor revenue increased by 1.8 per cent to $851 million in the quarter, helped by new store openings and online sales – which rose 32.2 per cent.

Coles chief executive Leah Weckert said shoppers were trading to cheaper beer. In wine, there was growth in sparkling, prosecco and rose was offset by lower champagne sales. The Ready-to-Drink category also grew strongly.

She said the company had also introduced new measures to reduce supermarket theft, waste and markdowns. Coles in August flagged growing theft as a significant problem at the chain.

Coles said on Thursday there were improvements in waste and markdowns across the quarter, and new technology to help stem theft in stores is expected to operate in over 250 of the most impacted sites this year.

But theft remains a major headwind this half.

“The early results of stores where the technology has been rolled out are in-line with our expectations. A number of broader cost and margin optimisation measures have been initiated across the Group with some benefits expected in the first half,” the company said.

But JPMorgan analyst Bryan Raymond said in a note before the sales results that it was too early for capital investment in cameras and gates to be making an impact on stock loss.

“We would not expect a meaningful underlying shift in shoplifting trends in recent months given cost of living pressures are persisting,” he wrote.

MST Marquee analyst Craig Woolford said in a note comparable sales growth in Coles supermarkets slowed more markedly than Woolworths and its liquor business had a weak quarter.

“We expect small downgrades to earnings given the weaker trends are likely to continue into 2Q24e and beyond as industry-wide inflation eases back,” he said.

More to come