How thwarting thieves (rather than ‘stealing’ from customers) boosted Coles profit

The government, the Coalition and in particular the Greens have effectively accused the two large supermarket groups of legally robbing customers by price gouging. So it’s contextually fascinating that one of the biggest drivers of Coles’ billion-dollar-plus profit in 2024 was successfully thwarting thieves who loot its supermarket shelves.

Foiling thieves contributed $80 million to Coles earnings in the second half of the financial year. In the same period last year, Coles lost twice that amount to theft. Successfully reducing its costs was also an important element in the mix that helped the supermarket division report a pre-tax profit improvement of about 10 per cent.

Coles CEO Leah Weckert said the company had invested a record amount into lowering prices.Credit: Eamon Gallagher

And this “shrinkage” isn’t pensioners pinching a few sausages or some milk, it’s people (often organised crime) taking high-value goods for resale – apparently cosmetics are popular items along with meat, which is resold to the restaurant trade.

And as for the Canberra narrative that Coles is the gouging customers, this cannot be measured by revenue alone because this is a function of volume and not just price.

The more accurate measure would be supermarket inflation, which in the fourth quarter fell to 1.5 per cent. But even this number ignores the fact that some goods increased in price because Coles paid more to its own suppliers.

The Greens were fast out of the gate on Tuesday in the race to pummel Coles in the wake of its profit.

And it would be superficial and simplistic to rely on Coles’ improvement in retail margins as evidence of gouging because margins will also improve if costs are taken out of the business.

Coles is a very large company, so quoting $1.1 billion in net profit as proof of gouging is ludicrous – it neither supports nor refutes the notion that Coles is overcharging its customers.

Sure, there are expensive items on the shelves and there is a sizeable cohort happy to pay top dollar. But the trick for any good retailer of essential goods is to offer a mix of value items that appeals to every socio-economic group.

Coles boss Leah Weckert said on Tuesday that in the 2024 financial year, the company had invested a record amount into lowering prices.

But for supermarkets, which have been hauled over the coals this year by politicians of all stripes looking to strut their bona fides on fighting the cost of living, their behaviour is under intense scrutiny.

Supermarket inflation fell to 1.5 per cent in the fourth quarter.Credit: Louie Douvis

One response from Coles has been to take some of the friction out of redeeming loyalty points for checkout discounts.

Two million shoppers did this for the first time at Coles in 2024 – which itself is a measure of the tightness of household budgets.

Another interesting element to shopper behaviour is softer sales of alcohol, which was evident in Coles’ results and in a report from Endeavour Group (which owns Dan Murphy’s) that sales were soft in the first seven weeks of the new financial year.

But the Greens were fast out of the gate on Tuesday in the race to pummel Coles in the wake of its profit.

Long on hyperbole and short on evidence, Greens senator Nick McKim reckons: “Coles’ $1.1 billion profit is a sick joke for the millions of Australians struggling to afford food and groceries.”

“Coles is cashing in on a crisis, showing complete contempt for the people who are struggling the most,” he said.

Opposition Leader Peter Dutton who has previously called for forced divestiture of supermarket stores looks to have more recently turned his attention to big-box retailers such as Bunnings, which will be grilled at a parliamentary hearing later in the year.

But make no mistake in reporting a healthy profit at Coles, Weckert has led with her chin – politically speaking. She will be exposed to calls that the supermarket group is over-earning, regardless of whether that claim is justified.

It’s a gutsy move.

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