Australia’s second largest supermarket chain Coles Myer has reported full year sales of $25.5bn for FY2002, an increase of 8.8% over the previous year.
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Sales for the Q4 were A$6.2bn, up 8.6% year on year. Coles’ comparable store sales rose by 4.6% over the full year, including Q4 growth of 4.8%.
CEO John Fletcher said: “This was a solid sales performance, particularly given the scale of the rebuild activity underway throughout the business and the highly competitive nature of the market.”
Food & Liquor
Alan Williams, COO, food, liquor and logistics, said Coles Myer’s supermarkets and liquor stores delivered double-digit sales growth over FY 2002.
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By GlobalData“Momentum in our ex-Franklins stores continues to build, with these stores generating sales of A$350m during the year,” Williams explained: “The Q4 was characterised by heavy promotional activity by our competitors, including the re-emergence of ex-Franklins stores under new owners. Our sales continued to grow faster than the market during this period, however, we did not sustain our normal rate of improvement.
“We have significantly upgraded our marketing strategy in the first quarter of FY2003, in response to the heightened competitive environment. Our more aggressive promotional activity will include the reinvestment of savings from the first reduction in shareholder discount rates on 31 July 2002.
“Our capacity to reinvest for long term growth will also be boosted by the cost and business efficiencies from the review of the food & liquor group, which is now well underway. An update on the review will be provided at the announcement of our FY 2002 profit results in October.
“Our expansion program remains on track, with 3 supermarket openings during the Q4. A total of 51 new supermarkets were opened in the full year, including acquisitions.
“In addition, 34 supermarket openings have now been secured for FY 2003, in line with the strategic plan. We will also open over 40 liquor stores in FY 2003, boosted by the removal of liquor license restrictions in Victoria,” Williams added.
General Merchandise & Apparel
Warren Flick, COO, general merchandise and apparel (GM&A), said: “We are very pleased with the progress being made at Target and Kmart, while we continue to focus on improving the performance of Myer Grace Bros (MGB).”
“Importantly, the distinct customer positioning at Target and Kmart are each achieving simultaneous sales success,” Flick said: “GM&A’s team of managing directors is now in place. In Target and Kmart, the turnaround is clearly working. At MGB, under our new MD, Dawn Robertson, a similar rebuild process is underway.
“Strong stocktake sales activity has ensured that seasonal stock is being cleared as planned and inventory levels are below prior year. Stock-turn has increased substantially over the year. Across all brands we continue to strategically reinvest in price, range, quality and service. Cost savings initiatives are progressively building under Operation Right Now,” Flick said.
Target
Target’s recovery continues to gain momentum, with sales growth of 9.3% in the Q4 and 4% for the FY. Flick said: “Apparel performance has strengthened across all categories. This reflects growing customer acceptance of our strategy of on-trend, quality merchandise at very affordable prices.
“Range improvements in home and entertainment categories are achieving encouraging sales results. It is also significant, that for the second year in a row, year-end inventory levels are much reduced.”
Kmart and Officeworks
Kmart and Officeworks’ combined sales grew by 13.9% over the quarter and 8.4% for the full year.
“Kmart sales growth accelerated strongly in the Q4, with improved performances in both apparel and hardlines. Ongoing range improvements, more focused marketing and growing customer acceptance of the lowest price guarantee policy were key drivers.
“We continue to refine our promotional mix. As a result, the quality of the sales mix strengthened over the quarter, with regular sales growing at more than double the rate of promotional sales.
“While the decision to become more price competitive had a significant impact on Kmart’s margins in preceding quarters, we are seeing improvement as we progressively lower our costs and drive sales volumes. Officeworks delivered another impressive performance.”
Myer Grace Bros
MGB sales, including Megamart, increased by 1.2% in the Q4 and 4.4% for the full year.
“As previously indicated, MGB performed below expectations as a consequence of poor apparel sales during the H2. As a result, we have aggressively cleared a large proportion of the winter apparel in-season, following additional mark downs and increased marketing during the stocktake sale period.
This better positions MGB for the new financial year.
“We remain committed to our strategic positioning and are continuing to improve our service standards and store presentation. With MGB’s new MD in place, we are in a position to undertake a steady rebuild of the brand,” Flick said.
e.colesmyer
e.colesmyer’s sales rose by 40.6% in Q4 and 29% for the FY (excluding Myer Direct, sold in the H1). This strong performance was led by Harris Technology and Coles Online. As part of the firm’s strategy of incubating new concepts within e.colesmyer, the fully developed Officeworks Direct will be managed within the core Officeworks business in FY2003.
Outlook
Coles Myer’s FY2002 profit results will be announced on 3 October, but the company said that it anticipates FY net profit after tax at the lower end of the A$350-365m range it announced on 6 May 2002.
FY2002 retail EBIT is expected to increase by around 6% on the prior year. At Myer Grace Bros, as a consequence of additional mark downs and marketing, together with a potential write-down of software assets, a loss for the full year is expected.
Fletcher concluded: “While facing many challenges at the onset of this transitional year, we have made real progress on the rebuild of Target and Kmart. We remain focused on the opportunities to improve MGB.”
