Coles managing director Ian McLeod said today (23 October) that the supermarket group had made "encouraging progress" on its renewal strategy - but also warned that Australian consumers remain "cautious" and "value conscious".

Speaking at an investor briefing for Coles' owner Wesfarmers, McLeod unveiled first-quarter sales growth of 7.3% at the group's food and liquor business.

Wesfarmers acquired Coles in 2007 and the supermarket operator has since embarked on a "transformational" turnaround strategy. McLeod said that the initiatives in Coles' turnaround programme were "creating a solid foundation for future growth".

Coles' strategy has focused on ushering in a top-to-bottom "cultural change" from the formation of a "strong" leadership team, to better incentives for store management, to improved team member development and training at a store-level, McLeod said.

Coles has recently announced a number of senior appointments, including Tony Buffin, who joined Coles as finance director from Group Aeroplan and Boots UK.

However, the company has also appointed "over 150 regional and store managers" as well as introduced talent mapping and fast-tack development programmes, McLeod emphasised.

In a bid to improve its appeal, Australia's second-largest supermarket group has re-evaluated its consumer offer, placing greater emphasis on customer service, better store layout and improved in-store availability.

Meanwhile, McLeod said, Coles has also looked to improve its fresh product assortment, with local sourcing, direct supply and a "market atmosphere" in stores. The result has been double-digit gains in sales of fresh food items, McLeod revealed.

This year, the company has converted over 20 stores into its new test format, with over 50 stores targeted for conversion next year and further store renewals planned for fiscal 2011. McLeod said that the "strongest company sales densities" were seen at remodelled stores.

Looking to the remainder of the year, McLeod sounded a note of caution on the consumer environment, suggesting that Australian consumers well remain concerned with rising interest rates and higher fuel prices and will continue to be "value conscious".

However, on the positive, he added that food inflation will "remain low".

McLeod said that the company had made "encouraging progress on the renewal strategy to date", but admitted that the "complex and multi-layered" strategy will "take time to implement and deliver".