By Emma Koehn
The price of fresh produce and some meat is moderating at Coles, but the supermarket giant says rising theft at its stores is becoming a real issue as cost of living pressures hit Australian households.
The ASX-listed grocery giant reported on Tuesday that its net profits had increased by 4.8 per cent to $1.09 billion in the 12 months to June 25, with sales inching up by 5.9 per cent to $40.5 billion.
The result fell slightly short of market expectations, and investors sold off Coles shares at the open, with the stock 5.7 per cent lower at $16.25 in mid-morning trade.
In her first full-year results as Coles’ chief executive, Leah Weckert said food price inflation was moderating across the grocery chain, while key fresh produce goods like cucumbers, broccoli and capsicum were decreasing in price, while the affordability of red meat was also improving.
Price inflation across the group’s supermarkets came in at 6.7 per cent for the year, but the company said inflation was slowing, with prices increasing by 5.8 per cent in the June quarter.
The most recent quarterly data from the Australian Bureau of Statistics put food and non-alcoholic beverage inflation at 7.5 per cent for the June quarter, compared with the same period in 2022.
Weckert also said that consumers were becoming increasingly demanding to see value offers at the big supermarkets.
“They are looking to the supermarket to help them do more for their budget,” she said.
But the retailer said a rise in thefts was having a sizeable impact on the business, with the company pointing to a 20 per cent annual increase in “total” stock loss, which includes products that have to be marked down and disposed of and stock that has been stolen.
Weckert said the vast majority of Coles customers did the right thing when shopping at its supermarkets, but there had been an uptick in stock loss right across the retail sector, with “elevated levels of organised retail crime” in recent months.
“We are seeing a lot more reports coming through from the stores where there is a loss incident which is quite large,” Weckert said in a call with journalists on Tuesday morning.
Coles has taken action to address the issue, including increasing security at high-risk stores.
Looking at consumer spending patterns, the retailer said young families and those under the age of 34 were among those working hardest to reduce their spending. The company is now seeing signs that consumers are shifting from eating out to making meals at home.
“Eating out, take away and coffees from the café are increasingly being seen as treats,” said Weckert.
MST Marquee analyst Craig Woolford said Coles showed strong sales trends in the June quarter, but rising stock losses have likely contributed to falling gross margins in the second half of 2023.
’This may account for more than half of the weakness, with increased discounting possibly the remainder,” he said.
Coles investors will receive a fully-franked final dividend of 30 cents a share, bringing the full-year payout to 66 cents per share, a 4.7 per cent increase on last year.
Source: Thanks smh.com