Coles boss Steven Cain tips strong Christmas trading as consumers face rising energy and mortgage bills

Steven Cain says the signs for a strong Christmas are good, while next year higher interest rates and energy prices will test consumer spending.

Coles boss Steven Cain says he is seeing positive momentum from shoppers weeks before Christmas, although the big test for consumer spending will be early next year as energy and mortgage bills spike.

Speaking after the Coles annual meeting in Melbourne on Wednesday, Mr Cain said holiday spending indicators were upbeatand staff were working on ensuring Christmas supplies would hit the shelves, despite the threats to supply chains from recent flooding across the east coast.

“The take-up on the Christmas range has been good so far, we are redeeming plenty of the glasses which is a good sign as well, so all the indicators are positive and obviously what the team are working on is that we have the best availability given the circumstances around the flooding and rail disruptions and all of those sorts of things that are well understood,” he said.

His comments came as the Commonwealth Bank household spending intentions figures for October indicated a meaningful slowdown from growth rates one month earlier, pushed along by higher prices in food. “The retail spending intentions index rose by a strong 3.3 per cent in October, the strongest lift since July,” CBA economists wrote in a note.

“However, higher inflation is significantly impacting the nominal value of spending in this sector, particularly food which makes up 35 per cent of this category. “In October, spending at grocery stores and supermarkets rose strongly, although given recent lifts in food prices, volume growth would be much weaker.”

Mr Cain said he hasn’t witnessed any impact as yet from the recent spate of interest rate hikes by the Reserve Bank, but conceded this could become an issue for consumers in the new year as households also carry the cost of rising electricity and gas prices.

“We have not seen any material impact so far (from interest rates) but I guess what everybody is waiting for is what happens with gas and electricity prices and when the fixed (mortgage) rates roll off,” Mr Cain said.

“I think those will be the next two big cabs of the rank. Hopefully next year that inflationary pressure certainly, on the grocery side, should begin to alleviate.”

Coles boss Steven Cain says the signs for a strong Christmas are good, while next year higher interest rates and energy prices will test consumer spending. Picture: Stuart McEvoy/

In his address to shareholders, Mr Cain described 2023 as a “transformative year” for the retailer as it installs new automated facilities to pick, pack and send its groceries to online shoppers. Reflecting on the year ahead, Mr Cain said that the new Witron and Ocado automation facilities would make 2023 one of the most transformational years in Coles’ 108-year history. The new facilities would provide supply chain efficiencies, and a better online customer experience, he added.

“We are making significant progress on our strategy and our increased investment in the business. The good news is the best is still to come,” Mr Cain said.

Coles shares fell 11c, or 0.7 per cent, to close at $16.48 on Wednesday. They have fallen around 8 per cent since December 31.

Earlier this month, Woolworths chief executive Brad Banducci said food inflation at his supermarkets had accelerated to 7.3 per cent over the three months to September 30 led by large price hikes in fruit and vegetables due to poor weather conditions.

Woolworths last week unveiled its first quarter trading performance, with total sales down 1.8 per cent to $16.36bn, but all eyes were on its report of inflation at its flagship supermarkets and the outlook for food supplies.

The faster pace of food inflation at Woolworths was mirrored by Coles, which last month reported its first quarter trading and said at the time that inflation had been particularly strong in fresh food with prices up 8.8 per cent for the period, driven by key food items across wheat, bakery and fruit. Total supermarket price inflation of 7.1 per cent was recorded for the first quarter at Coles.

Originally published as Coles boss Steven Cain tips strong Christmas trading as consumers face rising energy and mortgage bills