Coles issues dire grocery bill warning as inflation surges

Supermarket giant Coles has been forced to jack up prices and says shoppers could be saddled with more price pain in the months ahead.

Coles has been forced to jack up prices on a range of everyday items and warned shoppers there could be more price pain in the months ahead.

The $25 billion retail conglomerate on Thursday said it increased prices by an average 3.3 per cent over the March quarter to pass on the inflated cost of shipping, fuel, meat, and fresh vegetables.

This price hike is softer than the 5.3 per cent inflation for grocery products reported by the Australian Bureau of Statistics on Wednesday, but Coles chief executive Steve Cain said costs could climb further in the months ahead.

“Supplier input cost inflation is expected to continue in the fourth quarter and into FY23,” the supermarket told investors on Thursday.

Prices are surging across a number of consumer sectors as lingering Covid troubles and the war in Eastern Europe exacerbate supply chain bottlenecks, making it more expensive to secure, ship, and distribute goods.

Coles said it increased prices by 3.3 per cent over the March quarter to pass on the inflated cost of shipping, fuel, meat, and fresh vegetables. Picture: NCA NewsWire / Jeremy Piper

Petrol, for example, climbed 11 per cent in the March quarter and is up 35 per cent over the past year.

Cain said many suppliers had lifted their prices for the first time during the hugely uncertain time for the global economy.

Flooding across Queensland and NSW also affected the availability of fruit and vegetables during the period while high livestock prices had put a premium on meat.

Coles predicts supplier costs to continue to remain heightened in the fourth quarter and into the new financial year, which could mean an even more expensive shop.

The Australian Bureau of Statistics on Thursday revealed nearly 60 per cent of all businesses experienced increases in the cost of doing business over the three months to April 2022, although more than half of the businesses with higher costs held off on increasing their prices.

“For those that did increase prices, 42 per cent had partially passed on costs and 6 per cent had fully passed on the increases to customers,” ABS Head of Industry Statistics, John Shepherd, said.

When considering the month ahead, 31 per cent of businesses expect operating expenses to increase.

In a statement Coles said it was focused on its commitment to deliver “trusted value” via its ‘own brand’ products

“Coles Group remains focused on our commitment to deliver trusted value for Australian families amid growing cost of living pressures driven by both local and global supply circumstances,” Coles said.

A shopper looks at the near empty chicken section at Coles Supermarket Bondi Junction. Picture: Jane Dempster/The Australian.

Thursday’s inflation warning came as Coles boosted sales to $8.2 billion for the first three months of the year, with comparable sales growth accelerating to 3.6 per cent.

The supermarket said its success had been helped by strong online sales and the relaunch of its ‘What’s for Dinner Campaign’ focused on delivering affordable meals to customers.

Growth was also supported by capacity increases in same day and next day home delivery and Click & Collect.

It had been helped along by an Omicron-related sales surge early in the quarter, although flooding had forced the temporary closure of 130 stores and it had booked $65 million in Covid costs – mainly due to staff absenteeism.

The quarterly sales result may have been within market expectations but investors initially appeared unimpressed.

Shares in Coles were down 0.5 per cent to $18.27 in early ASX trade on Thursday even though the rest of the market was 0.9 per cent higher.

Rival supermarket Woolworths reports its third quarter sales results on Tuesday May 3.

Sales of $15.2 billion are expected, with analysts also keen to gauge the impact of inflationary pressures on the company’s bottom line.