Promotions such as Little Shop on the wane but won’t stop just yet, says Coles boss
Supermarket collectables could soon be a thing of the past, with promotions such as Little Shop and Ooshies losing their lustre, according to the influential boss of a giant grocery chain.
Business
Don't miss out on the headlines from Business. Followed categories will be added to My News.
Coles chief Steven Cain says the lure of supermarket collectables is starting to wane but that does not mean they will disappear any time soon.
And Mr Cain has hinted Coles will roll out a new promotion to counter Woolworths’ upcoming Discovery Garden, where shoppers will be able to earn free plants.
“We have a pretty exciting plan through to Christmas,” he said today.
Coles and Woolworths have rolled out a string of collectable promotions – Little Shop, Little Shop 2, Stikeez, Lion King Ooshies, Disney Words – in a bid to attract shoppers.
Mr Cain said the promotions had driven sales but their impact was starting to wear off as both chains offered them.
“What we are seeing is a neutralisation of their impact,” he said.
“Our long term plan is not to feature collector schemes as highly as they are (featured) today. It’s not to say we won’t have them, but obviously in the background, we have Flybuys and we obviously want to offer a compelling everyday value proposition as well as convenience and online.”
Mr Cain made the comments to analysts after being quizzed about how effective the promotions were in creating long-term customer engagement and whether Coles had plans to counter Woolworths’ Discovery Garden.
He was speaking after Coles reported a 9.1 per cent drop in net profit to $1.43 billion for the year to June after starting life as a stand-alone company in November.
Coles said the hit to the bottom line was in part due to the accounting treatment as it was spun out of Wesfarmers, which has kept the Kmart, Target and Officeworks chains.
It also gave up fuel sales at its Coles Express chain under a new deal with supplier Viva Energy.
Underlying profit, which adjusts for the demerger, fell 8.1 per cent to $1.32 billion.
Sales revenue was down 1.7 per cent to $38.4 billion. But it rose 3.1 per cent to $35 billion when adjusted for the changes to fuel sales and excluding the retailer’s Queensland hotel interests.
In supermarkets, earnings before interest and tax grew 2.2 per cent to $1.18 billion. It was the first time supermarket earnings have risen since 2016.
Earnings in liquor were up 8.4 per cent to $120 million but they plunged 70 per cent to $50 million in its convenience and fuel arm.
MORE: QANTAS TO BUY BACK $400M SHARES
BEST PLACES TO EAT IN RINGWOOD
Coles also surprised investors with a special dividend of 11.5c a share on top of a final dividend of 24c.
In March, the group stuck a new deal with Viva, under which it no longer takes a cut of fuel sales in order to lower the pump price.
High fuel prices have resulted in volumes slumping by about 40 million litres a week since 2014. Volumes dropped 13 per cent to 60 million litres a week over the year to June.
But Mr Cain said the new agreement and the roll out of Little Shop 2 to its convenience outlets had arrested the slide. “The decline has halted,” he said.
Goldman Sachs analyst Andrew McLennan said Coles had delivered a better-than-expected result in supermarket earnings, dividends and net debt.
“The result is a significant surprise from a cash perspective,” he said.
Coles shares jumped 2.1 per cent today to $13.52.
How the NBN has delivered just in time
The NBN has delivered, and it has done so in what can only be described as the ultimate — the hit-the-ground running immediate — stress test, rites Terry McCrann.
Sydney airport the wrong place at the wrong time
Sydney Airport has some of the sweetest acreage in Australia but when passengers numbers have dwindled from 9 million in the March quarter to 400,000 in the June quarter, that doesn’t count for much, writes Terry McCrann.