Coles in pledge on rise in prices

COLES CEO Steven Cain is staking his claim for the hearts and wallets of consumers by keeping his supermarket chain’s price rises below the national inflation rate as he pledges not to simply “wave through” price increases from food and grocery suppliers.

Mr Cain said Coles would balance the relationship between suppliers demanding price rises and consumers counting their pennies, but said Coles needed to represent value for shoppers.

“What we do know is that our value metrics are in a good space in relative terms,” he said. “We are working hard to make sure that we help the supplier and also make sure we are delivering trusted value to customers.”

The company on Thursday reported sales for the three months to the end of March, revealing inflation at Coles supermarkets was running at 3.3 per cent. That is well below the 5.3 per cent grocery price inflation figure reported for the sector in CPI figures released by the Australian Bureau of Statistics on Wednesday.

Mr Cain said Coles would use this inflationary period to

bolster its bargain credentials to shoppers and this meant sometimes not simply waving through price rises from his food and grocery suppliers to shoppers.

“If you look back to when we demerged (from Wesfarmers) we have consistently kept the price increases below the national average, and clearly the job of a good retailer is not to just wave everything through – you do need to work on behalf of your customers otherwise you will find that the customers will start doing your job for you,” Mr Cain said.

His job was “supporting our supply base through very difficult times, but also looking after our customers to provide trusted value as prices rise”.

Mr Cain said he had not yet detected a switch in consumer spending towards more cheaper groceries, such as homebrand products or to cheaper cuts of meat, but said the search for bargains would probably play out in time as consumers looked to save.

However, inflation was not all running one way, with the supermarket’s biggest selling item – bananas – down in price by 25 per cent, year on year.

Coles reported that thirdquarter sales rose 3.6 per cent, year on year to $9.1bn despite disruptions from Covid-19, floods and cost price inflation affecting suppliers. The impact of floods cost Coles an estimated $30m in the quarter as its stores were damaged, transport disrupted and stock ruined, and this loss did not include forgone profits from the interruptions to its business operations caused by the wild weather earlier this year.

The costs of keeping stores and staff safe from Covid-19 also accelerated, with costs rising to $65m against about $10m for the third quarter of last year.

Coles’s supermarket sales rose 4.2 per cent to $8.23bn, with comparable sales up 3.9 per cent. The performance of its supermarkets was at the upper end of analysts’ expectations, which ranged from 2 per cent to 4.3 per cent.

Liquor sales rose 2.8 per cent on a like-for-like basis to $784m.

Coles said its neighbourhood stores were contributing more to its results.