AUS: Supermarket problems hit Coles profits

By: just-food.com | 19 September 2007

Flagging supermarket sales and costs linked to the company's sale has weighed on full-year earnings at Australian retail giant Coles Group.

This morning, the company posted underlying operating profit of A$1.1bn (US$937m) for the 12 months to 29 July, an increase of 0.2% on the year.

Turnover fell 5.5% to A$34.7bn as food and liquor sales from Coles' supermarkets slumped by 9.5%.

CEO John Fletcher (pictured) insisted Coles had already warned that earnings would be flat as the company "transitioned through its business transformation and simplification programmes".

He said: "The result being announced today includes a lower contribution from supermarkets, as previously flagged, offset by the strong performance of all other businesses and additional savings identified in business simplification."

Fletcher admitted "considerable work" needed to be done to revitalise Coles' supermarkets business. "It was a challenging year in supermarkets…mainly due to the poor execution of the Bi- Lo rebranding strategy and the impact of the change program on the business. However, we are clear on the underlying issues and priorities."

On the company's sale to Australian conglomerate Wesfarmers, Coles chairman Rick Allert said the company's board "unanimously recommends" the takeover. Coles shareholders will meet to vote on Wesfarmers' A$18.2bn bid in November.

Companies: Coles