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Coles sees growth in first quarter

Coles saw a 5 per cent increase in total sales during the first quarter of 2019, driven by in-store execution, continued investment in flybuys and a successful “Little Shop” campaign.

The announcement confirms analyst speculation that the marketing campaign improved sales for the supermarket by at least $200 million for the quarter.

“The result for the first quarter was pleasing as it demonstrated the ability of the Coles team to continue to focus on improving in-store execution while preparations continued for the proposed shareholder vote on the demerger of Coles,” Wesfarmers managing director Rob Scott said.

Wesfarmers noted that Coles Supermarkets saw $7.65 billion in sales, 5.8 per cent higher than the prior corresponding period, with food sales increasing 5.1 per cent.

The business’s online offering reached quarterly growth of over 30 per cent, and is on track to reach over $1 billion in sales for the financial year.

Coles’ liquor division saw 2.1 per cent sales growth on the previous period, reaching $744 million across its Liquorland and First Choice Liquor Market conversions.

Additionally, the business’s convenience arm, Coles Express, recorded sales of $1.43 billion, with the 2.5 per cent sales growth driven by improvements in the division’s food-to-go offering and convenience range.

However, fuel volumes decreased by 14.8 per cent and were impacted by a substantial increase in the cost of fuel and a lower Australian dollar.

Exceeding expectations

Analysts at Citi recently noted that this growth signified a “remarkable turnaround” for the supermarket, during which it managed to outperform Woolworths for the first time in two years.

“Coles Little Shop campaign exceeded our optimistic expectations,” Citi said.

“This has come at the expense of Woolworths, where like-for-like sales growth is likely to moderate to 1.5 per cent.”

However, Citi noted it was not convinced that the supermarket giant would be able to maintain its winning streak into the coming quarters.

“Continued investment is necessary in order to continue momentum over the coming quarters. We see significant risks ahead that Coles will not be able maintain its lead over Woolworths, given senior management changes and lagging execution levels,” Citi said.

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