Coles feels virus impact

Store refurbs hit by ‘frozen’ refrigeration units

COLES has become the latest business to be directly hit by the coronavirus outbreak which has forced it to slow its store refurbishment program.

Coles has warned investors it is unable to receive refrigeration units as the models it uses are manufactured in the Chinese city of Wuhan where the Covid-19 outbreak originated from.

Chief executive Steven Cain said Coles refurbished about seven to 10 stores a month, updating layouts and overhauling fixture and fittings.

Refrigeration units are a key focus for the supermarket giant’s refurbishment program as it boosts its convenience offer which includes new lines of ready to eat and ready to cook meals and items.

“Every month that it goes on it could delay up to 10 stores,” Mr Cain said.

“The main refrigeration company that a lot of companies use is based in Wuhan and nothing is coming out of China at the moment.”

Mr Cain said Coles was investigating alternative refrigeration suppliers.

“Whenever we see an issue we try to act on is at soon as we can,” he said.

The coronavirus outbreak is beginning to ripple through a range of Australian businesses.

Furniture seller Nick Scali telling its customers deliveries will be delayed by two weeks, rail operator Aurizon has warned it cannot pick up rail wagons being made in China while more than 100,000 Chinese international students are locked out of the nation.

The disruption at Coles was revealed as it posted a 34 per cent drop in net profit to $489 million for the 27 weeks to January 5.

The result was complicated by Coles’ demerger from Wesfarmers, a new fuel deal where it no longer gets a cut of petrol sales and the spin-off of its pubs and pokies business.

The retailer also took a $20 million hit for underpaying about 600 workers over a six-year period.

Underlying earnings before interest and tax rose 0.4 per cent to $725 million, hitting the higher end of its earlier $710 million and $730 million guidance

Sales fell 6.2 per cent to $18.8 billion but underlying sales, which adjust for various business changes, rose 3.3 per cent.

Like-for-like sales growth averaged 2 per cent for the half but accelerated from 0.1 per cent in the first quarter to 3.6 per cent in the second quarter as Coles enjoyed a strong Christmas.