Coles’ earnings have dropped for the first time since it was acquired by Wesfarmers nine years ago reporting a decline in sales amidst tight competition.
Coles reported a 13.5 percent fall in full-year profit to $1.61 billion, with comparable food and liquor sales growth slowing by one percent, and revenue largely flat.
Analysts have expected this decline, as competitor Woolworths’ recent heavy investment in lowering prices has resulted in like-for-like food sales outperforming that of Coles. Woolworths have also ramped up its online offering this year, with its new e-commerce site unveiled two months ago.
“In a very competitive environment, sales and margin pressures in Coles are expected to persist,” said Wesfarmers in its full-year results.
“Within this environment, Coles will focus on plans to further enhance the quality of its fresh offer, and improve merchandising and availability, while continuing to drive operational efficiencies to support investments in value and service,” said Wesfarmers chief executive, Richard Goyder, in a statement.
Goyder said he expects that over the long term Coles will return to earnings growth.
Wesfarmers saw its department store division, however, nearly double its profit to $543 million, largely due to another strong year for Kmart, as well as improved results for Target, which cut its losses by $10 million, following a $195 million loss last year. Officeworks saw a 7.5 percent profit increase to $144 million.
Goyder said there was “considerable work to complete the transformation” of Target, with the company taking “decisive steps” during the year to lower prices, improve merchandising and sourcing and exit unprofitable lines.