Slowing sales on the way at Coles

COLES has warned of uncertainties ahead in the wake of the COVID-19 pandemic, with the potential for the supermarkets sector to moderate significantly or even decline in the second half.

It comes amid sporadic COVID-19 lockdowns, a slump in immigration as borders shut, and Victoria in particular exposed to slower growth because of pandemic impacts.

The supermarkets group said as it pushed into the second half of fiscal 2021 it would see reduced sales compared to the height of the pandemic, when shoppers rushed to buy essentials during lockdowns.

Coles on Wednesday reported an 8 per cent rise in revenue to $20.57bn and a 14.5 per cent rise in net profit to $560m. The December half profit beat consensus forecasts of $516.5m.

Shares slumped 5.4 per cent to $17.20 as the market digested the prospect of a moderating supermarket sector.

It said supermarkets’ comparable sales growth had continued to flatten out and in the first six weeks of the second half was up 3.3 per cent.

Supermarket comparable sales were up 5 per cent in the second quarter, which was at the lower end of market expectations, which ranged from 4 per cent to 8.1 per cent.

Online sales growth has moderated to 37 per cent in the opening months of calendar 2021.

Coles chief executive Steven Cain said key shopping and economic trends were likely to appear in 2021.

These included some reversal of the local shopping trend as customers become more confident going to larger centres. He also said Coles was expecting reduced immigration, which had underpinned population growth, an important sales growth driver for Coles.

Furthermore, the benefits of recent improvements in employment and consumer confidence may be partly offset by a reduction in fiscal stimulus measures, Mr Cain said.

“Whilst COVID-19 will continue to present challenges it will also continue to present opportunities for change,” Mr Cain said.

Coles declared an interim dividend of 33c a share.