Coles profit up 2 per cent to $1.1bn amid ‘increased external scrutiny’

The boss of one of Australia’s two supermarket giants has been grilled on the behemoth’s profit margins.

The Coles boss has faced repeated questions about the retail giant’s margins as it reveals a $1.1bn profit.

Coles Group announced its annual financial results on Tuesday morning, showing revenue increased 4.4 per cent for the year to $43.6bn.

Total dividends to shareholders increased from 66 cents per share to $0.68. After-tax profit has risen to $1.1bn, up 2.1 per cent.

“There have been a number of challenges throughout the year, including changing customer behaviour, increased external scrutiny and cost inflation,” chief executive Leah Weckert writes in the results.

Prime Minister Anthony Albanese alongside Coles Group chief executive Leah Weckert at the opening of a new automatic distribution centre in Sydney in August. Picture: NewsWire / Gaye Gerard

The results encompass the Coles Group stable, including the Coles and Coles Local stores, Liquorland, First Choice Liquor Market and Vintage Cellars.

Household financial pressure was “front of mind”, Ms Weckert said.

Coles reduced prices on “hundreds” of essential and popular items and expanded how and when people collect Flybuys points, she said.

For every dollar a customer spends, Coles makes less than three cents, the results show.

“Supermarket price inflation” in the past year fell to 2.5 per cent, down from 6.7 per cent the year before, Coles says.

Coles Group chief executive Leah Weckert says for every dollar a customer spends, Coles makes less than three cents. Picture: NewsWire / Gaye Gerard

An Australian Council of Trade Unions inquiry into price gouging and unfair pricing practices in a range of industries, which reported its results early this year, was damning of supermarket price inflation.

That inquiry found between March, 2021 and September, 2023, price increases for items like cheese, bread, milk, eggs, dairy products and breakfast cereals varied between 19 per cent and 27 per cent.

Coles Group has spent more than $1.4bn building two automated warehouses in Queensland and Sydney and two automated customer collection warehouses in Sydney and Melbourne.

Coles Group chairman James Graham said the organisation had “engaged constructively” with governments and regulators in the past year.

Coles says its profit margin has stayed flat this year. Picture: NewsWire / Gaye Gerard

A Food and Grocery Code of Conduct review and an ACCC review have run the microscope over the supermarket.

Fielding questions from the media on Tuesday, Ms Weckert repeatedly defended Coles’ stagnant profit margin.

“For every $100 the customer spends, we make $2.60,” she said.

That 2.6 per cent profit margin is consistent with 2023 and lower than 2022.

“There has not been an increase in our profit rate in this inflationary period,” Ms Weckert said.

Pressed on Coles’ earnings having increased 5.7 per cent, the Coles boss pointed out payments to suppliers had gone up $2.4bn and wages had increased, which kept the profit margin flat.

“We have had significant cost headwinds this year,” she said.

More than 115,000 people work for the Coles Group. Picture: NewsWire / Gaye Gerard

Asked if Coles’ growing earnings left room to lower prices or pay suppliers more, Ms Weckert said if all profits were redirected to pricing, prices would only come down 3 per cent.

Asked about price gouging allegations and political heat the supermarkets were copping, Ms Weckert said Coles’ “down down” sales campaigns had reduced prices on seasonal items.

“We know cost of living is challenging for many families,” she said.

Coles had been part of a national conversation about inflationary pressures, Ms Weckert said, and argued by the supermarket selling more Own Brand items, shoppers could save while more rigid costs like rent, fuel and power bills were tougher to reduce.

The Coles Group notes inflation is easing, and prices are reducing on meat and fresh produce, but cocoa prices are rising.

Through the past few years of rising inflation, 90 per cent of shoppers had changed their behaviour, the Coles chief executive said.

People buy less meat, but they also buy more premium items as a replacement for eating out at restaurants.

Originally published as Coles profit up 2 per cent to $1.1bn amid ‘increased external scrutiny’