Coles to cut jobs as it plans new automated distribution centres

Coles will axe jobs and shut warehouses as it rolls out automated distribution centres in pursuit of rival Woolworths.

Trucks lined up at a Coles distribution centre. Pic: Mark Wilson

Coles has reacted quickly to the concerns of investors that it is being left behind arch rival Woolworths in rolling out automated distribution centres.

Parent company Wesfarmers (WES) announced today it will build two automated centres over the next five years, triggering as much as $150 million in redundancies and lease exit costs.

It means Coles will emerge as an independent company later this year with a stronger and more modern stable of distribution centres which should help it close the competitive gap with Woolworths, as well as new players such as Amazon.

Wesfarmers, which today won provisional approval for $20 billion demerger of Coles, said Coles had inked a deal with Wiltron Australia, the local arm of Wiltron Logistik and Informatik, to develop two new automated ambient distribution centres for Coles.

The cost of the redundancies and lease exits will weigh down Coles’ financial performance for fiscal 2019, with provisions of $130m to $150m expected.

However analysts and investors have been calling on the supermarket chain to invest in new automated distribution centres, which will help to tighten its supply chain and eventually cut away at costs.

Woolworths is in the first half of next year set to open its own automated distribution centre on the outskirts of Melbourne and analysts believe Coles was starting to fall behind its rival, and would need to soon invest hundreds of millions of dollars in its own tech-heavy distribution centres.

Wesfarmers chief executive Rob Scott said the decision to build and open two centres followed an extensive evaluation process to ensure it would support Coles’ strategy over the long term.

New Coles boss Steven Cain said the investment demonstrated Coles’ commitment towards modernising its supply chain which delivers more than 1 billion cartons to stores each year.

“The investment we are making in this technology is expected to lower supply chain costs, provide safer working environments and enhance our business competitiveness.’’