Coles’ modest supermarket sales growth shows Aussie shopping behaviour ‘normalising’ from Covid frenzy

Australian shoppers appear to have calmed down from the manic heights of their hoarding and panic-buying ways.

Coles’ long slog to topple Woolworths as Australia’s biggest supermarket chain still appears a distant dream after achieving modest sales growth in the fourth quarter, when pandemic-driven pantry-stuffing became less panicked.

Booking a 7.5 per cent rise in full-year net profit to $1.005bn on Wednesday, the group revealed supermarkets comparable sales growth over the three months to June 30 was 2.1 per cent - beating the median of analysts’ forecasts for 0.2 per cent growth - and an impressive 9.6 per cent rise over two years.

Coles was pleased to have gained some ground, coming after the most elevated sales in the fourth quarter last year – when Covid-19 seriously took hold, sparking a national lockdown and remarkable scenes at supermarkets as shoppers hoarded.

“Growth was driven by strategic initiatives that resonated with customers and customers spending more time living and working at home during Covid-19,” the company said.

Coles says shopping behaviour was normalising – until recent lockdowns. Picture: Brian Cassey

“Consumer behaviours demonstrated a trend of normalising to pre-Covid-19 levels during the fourth quarter, until the last few weeks when lockdowns were experienced across Victoria, in Darwin and parts of Sydney.

“Sales contributions from shopping centre and CBD stores increased relative to neighbourhood stores in the fourth quarter which had previously benefited from ‘local shopping’ trends.

“Furthermore, Sundays returned to be the largest trading day of the week and transaction trends improved with growth in the convenience, food-to-go and impulse categories, while basket size moderated.

“Despite normalising consumer trends, e-commerce sales continued to grow strongly with penetration reaching 6 per cent in the fourth quarter.”

Macquarie Research said the result was largely in line with its expectations, noting Coles’ progress with lifting online shopping rates, which the retailer hopes to boost with ongoing technology investments.

Woolworths is beating Coles in the online shopping wars, UBS says: Ian Waldie / Bloomberg via Getty Images

Credit Suisse noted Coles’ supermarket sales growth had accelerated further in the current quarter so far - up 1 per cent on a headline basis and 12 per cent on a two-year basis.

Moody’s Investors Service vice-president Ian Chitterer applauded the retailer, saying its solid earnings for fiscal 2021 strengthened its robust credit profile.

But in its inaugural Australian supermarkets analysis released on Tuesday, UBS criticised Coles for lagging behind Woolworths with online efforts, which had delivered its rival grocery market share gains.

“Coles has spent less than Woolworths on capex in recent years as a percentage of sales and this has contributed to performance,” UBS said.

Coles has wisely invested in Click&Collect during the pandemic.

Coles took a hit during the Covid-19 ‘local shopping’ trend, given its store network is more skewed to shopping centres and CBDs, UBS noted, saying the retailer more broadly continued to trail Woolworths “across in-store, strategic and cultural areas”.

On outlook, Coles says it expects the vaccine roll out – and in turn fewer lockdowns – will help return consumer behaviours to normal over the rest of this calendar year.

It expects to renew about 50 stores and to open about 20 stores this financial year, subject to conditions around the health crisis.

Shares in Coles inched one cent higher to $18.34.

Woolworths is expected to deliver its full-year results on August 26.

Almost $11bn worth of Exclusive to Coles product sales during the year was a rise of 5 per cent. Picture: David Clark/AAP

Originally published as Coles’ modest supermarket sales growth shows Aussie shopping behaviour ‘normalising’ from Covid frenzy