“The tighter the restrictions, the higher supermarket sales are, and also conversely, the lighter the restrictions the lower sales will be,” Coles CEO Steven Cain said on a media call on Wednesday.
It was no surprise to see staggering online sales growth, which jumped 57 per cent for supermarkets and 80 per cent for liquor, as consumers continue to enjoy shopping from the comfort of home.
Meanwhile the retailer’s Smarter Selling strategy, which uses data and technology-led solutions to operate more efficiently, is on track to deliver $1 billion in savings by 2023.
Positive start to Q2
For the first time at a quarterly results announcement, Coles shared an insight into its trading performance for the first four weeks of the current quarter, revealing 6.4 per cent comparable sales growth in supermarkets, or 5.4 per cent excluding Victoria.
Online sales growth was 45 per cent as demand slowed in Victoria, while liquor’s comparable sales growth was 16.9 per cent, or 15.3 per cent when excluding Victoria.
“The first four weeks of this quarter were still elevated,” Cain told media. “Coles was probably impacted more than most by Covid, due to the nature of our operations.
What we are seeing is a recovery in the types of stores that were most impacted.”
Cain highlighted a number of trends that he expects will work in Coles’ favour this quarter, including the need for hygiene products for health and safety reasons, and elevated demand for online recipes as more people choose to dine at home, something that the retailer is focusing on with its new website and app coles&co.
QUT marketing professor and consumer behaviour researcher Dr Gary Mortimer said the launch of the app was well timed.
“What that particular app does is provide shoppers with meal ideas – think cooking hints and tips from the likes of [celebrity chef and brand ambassador] Curtis Stone. So they’re really tapping into that cook-at-home situation,” Mortimer told Inside Retail.
He expects hospitality restrictions will remain in place at varying levels for some time into the future, meaning more small gatherings at home will boost supermarket and liquor sales; as will the higher numbers of people working from home.
“Some of the shifts are a bit more structural and in particular the working from home one, which will continue to benefit supermarkets for the foreseeable future,” Cain said.
With international travel restrictions in place, more Australians will be celebrating Christmas at home, which spells further good news for Coles, according to Cain. And the gradual opening of state borders will spark domestic travel. The more cars on the road, the better hope for the retailer’s troubled fuel and convenience business, Coles Express, he said.
Things are already looking up for the convenience arm which reported comparable sales growth of 10.2 per cent in Q1.
“It clearly shows a strong turnaround,” Mortimer said. “It’s an element of their business that hasn’t performed well previously, and that relates potentially to fuel pricing. But with consumers not being able to fly [to all states] domestically let alone internationally, more of us are choosing to drive and spend time locally.”
The significant decline in public transport usage has also likely helped the fuel retailer. Passenger numbers in NSW plummeted by about 80 per cent in April when Sydney was under tight lockdown restrictions, and has gradually crept back to about 45 per cent of passenger numbers a year earlier, according to Transport NSW documents obtained by the Sydney Morning Herald.
“We’ve avoided public transport in order to socially distance, so more of us are driving to work or driving to the office,” Mortimer added.
Online continues to prosper
During the first quarter, online supermarket B2C sales grew by 73 per cent. It’s an area the retailer is continually investing in with enhancements to the user experience, implementation of single-click checkout and greater personalisation.
The number of stores with contactless click-and-collect increased by 14 per cent to over 450 to take advantage of the increased demand.
Jason Pallant, marketing lecturer at Swinburne University of Technology, said the big question is around the kinds of consumer behaviour that will remain in the long-term.
“For some consumers, this will have shifted their priorities and desired shopping style moving forward,” he told Inside Retail.
“The key for Coles and our other supermarkets is continuing to be agile and ready to adapt as we see how consumer behaviour and needs continue to evolve. It’s easy to say yet quite hard to do, but it’s the reality of retail across all sectors it seems.”
Christmas set to be a cracker
It’s shaping up to be a bumper Christmas for the supermarket giant, which has added almost 300 new products as part of the Christmas range.
While Cain is optimistic about the quarter, he said some level of uncertainty still remains.
“We honestly don’t know what the rest of the year holds, but given those four trends that we talked about, we would expect supermarket sales to continue to be elevated for the next few months,” he said.
“It will be a happier Christmas than Easter,” Cain said confidently.