Coles is cashing in
COLES is the latest industrial to generate growing dividends, as it announced a near-15 per cent lift in its final payout on the back of surging sales at its supermarkets.
At a time when the banks are reducing or cancelling their dividends, a new vanguard of industrial and mining companies is taking their place to offer a higher dividend stream.
Unveiling its full-year results yesterday, Coles announced its supermarkets had ratcheted up their revenue and earnings as it declared a final dividend of 27.5c a share, up 14.6 per cent on last year’s final dividend.
It came as Coles reported a 31.8 per cent drop in full-year statutory net profit to $978m, as the supermarket giant accounted for earnings lost when it was demerged from Wesfarmers in late 2018.
However, the supermarket group said underlying earnings were 5.7 per cent higher at $951m for fiscal 2020, up from $900m in 2019, and slightly ahead of market forecasts of about $943m.
Coles said total revenue for the company fell 1.8 per cent to $37.78bn. But the retailer’s supermarket sales continued to gain as the nation deals with the COVID-19 pandemic.
Fourth-quarter same-store sales improved by 7.1 per cent — beating many analysts’ expectations — to record Coles’s 51st consecutive quarter of supermarket sales growth.
The one-third slide in fullyear statutory profit reflects the demerger in late 2018, which removed Kmart, Target and Officeworks from the Coles accounts, with 2019 still including five months of profits from the Wesfarmers businesses.
The subsequent hotels joint venture and restructuring of fuel wholesale arrangement also meant Coles no longer receives revenue from either of those two businesses. Its sales were also hurt by the demerger and fuel deal.
Coles said retail sales excluding these one-off events rose 6.9 per cent to $37.4bn.
In June 2019, Coles set out a new strategy to “lay the foundations to succeed in our second century’,’ Coles chief executive Steven Cain said.
“Since that time, we have been presented with a number of unforeseen challenges, including drought, devastating bushfires, and of course the ongoing COVID-19 global pandemic,” he said.
“This has provided the greatest test of our lifetime and we are experiencing things we never thought we would see in a supermarket, or for that matter Australia.
“Coles, for its part, has become a designated ‘essential service’, playing an important support role during these crises, and it will also play an important role as the nation recovers and returns to growth.”
In an update for the fourth quarter, Coles said COVID-19 factors continued to have an impact on both the level and mix of supermarket sales as customers made fewer trips to supermarkets, while basket size increased significantly.