Coles primed for future growth, aims to expand digital reach

Coles chief executive Steven Cain says the supermarket group has emerged from the COVID-19 with a robust balance sheet.

Coles chief executive Steven Cain: ‘Christmas and summer 2020 will be like no other.’ Picture: Wayne Taylor

Coles chief executive Steven Cain says the supermarket group has emerged from the COVID-19 with a robust balance sheet that will help it respond to growth initiatives as they appear, while the retailer will also focus on expanding the reach of its digital channels to improve product offerings and lower the cost of doing business.

Addressing shareholders at the company’s annual meeting on Thursday, Mr Cain said the supermarket group was also preparing for the Christmas rush, with the restrictions on overseas travel forcing an extra one million Australians to spend the summer at home.

“Christmas and summer 2020 will be like no other,’’ Mr Cain told the virtual AGM.

“The impossibility of overseas travel has prompted forecasts of more than one million additional Australians spending the holidays at home this year.

“Meanwhile, the ongoing need for social distancing means large celebrations are likely in many cases to be replaced by many smaller gatherings at home.”

Turning to the company’s balance sheet strength, he said the company was well positioned to take advantage of new opportunities as they emerged.

“We continue to maintain a strong balance sheet that will provide the flexibility to invest for ­future growth and take advantage of opportunities as they arise,” he said. “Over the course of the year we reduced our net debt by $158m to $362m, and we diversified our debt portfolio and lengthened our average debt maturity to 5.6 years by issuing $600m of unsecured fixed rate Australian dollar medium-term notes during the year.

“The funds were used to repay bank debt, and at the end of the ­financial year we had undrawn ­facilities totalling just over $2bn.”

Some of that balance sheet ­capacity would be poured into online and digital platforms, with Coles chairman James Graham saying the retailer had to continue to focus on its online reach.

“Across all elements of what we do, we recognise the need to adapt our operations by increasingly using digital information and advanced technology to lower our costs of doing business and improve our product offering,” Mr Graham said.

Much of that online strength was on show for the company’s full-year results, with online sales booming as consumers were locked down at home or shunning shops to stay at home due to the COVID-19 pandemic.

“Coles online grew sales by 18.1 per cent and would have been even stronger if not for the temporary suspension of operations in March and April,” Mr Cain said.

“This was necessary due to limited product availability, and so we could we reset the business to meet the needs of the most vulnerable in our community with increased capacity and priority service.”

At a recent trading update, Coles revealed that for the first quarter online sales growth was 57 per cent, while liquor online sales increased by 80 per cent.

Mr Graham said: “While the patterns of community activity have been fundamentally changed by the pandemic and there remains considerable uncertainty as to future impacts, at least in the short term we seem likely to see the maintenance of high levels of community awareness of the importance of health and hygiene standards; higher levels of home consumption of food and liquor; increased focus upon online purchases and digital recipes; and an increase in population numbers during traditional holiday travelling periods, so long as international travel is restricted. In these circumstances we will continue to adapt our business model at pace.”

Mr Cain said the retailer would continue to focus on value, which customers were demanding more than ever.

“In the past year we have executed one of the largest range updates in Coles’ history, using data-driven ranging tools to tailor our customer offer and introduce more than 1600 new product lines,” he said. “With value more important than ever for customers, our campaigns to ‘Help Lower the Cost of Breakfast, Lunch and Dinner’ introduced more than 1500 new products at everyday low prices, while sales of our own brand grew by 10 per cent to exceed $10bn for the first time — ­accounting for more than 31 per cent of supermarket sales.”