Coles prices still heading down, but slower

Coles prices still heading down, but slower

Coles food and liquor business is showing growth into the second quarter and price deflation is easing, Wesfarmers says.

"We have been happy with the start to the financial year which Coles has made, with underlying volume growth in the food and liquor businesses continuing to be strong," chief executive Richard Goyder told shareholders today.

Mr Goyder noted Wesfarmers food and liquor's like-for-like sales growth of 3.7 per cent in the first quarter, while Coles Express fuel volume grew 0.4 per cent.

"Growth in these businesses has also continued into the second quarter of this year," he said at the company's annual shareholders' meeting.

"While Coles continues to experience price deflation ... it is lower than that experienced in the first quarter," he said.

The retail-to-coal company's food-and-liquor price deflation was 3.2 per cent in the first quarter, driven by a price war as Coles competes with Woolworths.


Both chains, which control over 70 per cent of the grocery market, have slashed the cost of basic items such as food, milk and meat to win foot traffic.

Coles, which has had food and liquor price deflation for 12 of the last 13 quarters, said last month a rise in fresh produce prices would slow price deflation through the course of the year.

Mixed performance in divisions

Mr Goyder said that the company was performing in line with the outlook statement it made at its full year results.

He said Wesfarmers’ insurance and retail business, which includes Coles, Target and Bunnings, has had a good start to 2012-13.

‘‘Our retail businesses continue to achieve good transaction growth and provide better value for customers, while our insurance business has to date benefitted from improved underwriting performance and lower claims experience,’’ he said.

However, he said the company’s industrial businesses have had a mixed start to fiscal 2013. Its resources businesses had been affected by significantly lower commodity prices and its industrial and safety division had experience a slowdown in some of its markets.

But Wesfarmers’ chemicals, energy and fertilisers division had been trading well.Wesfarmers made a profit of $2.1 billion for the year to June 30, an 11 per cent increase on the $1.9 billion from the previous year.

Hoping for Christmas spending

Mr Goyder said Wesfarmers was hopeful that the company’s retail businesses would benefit from stronger trading conditions for Christmas.

‘‘We are hopeful for a positive trading outcome in the retail businesses during the important Christmas period,’’ he said.

For the remainder of the financial year, Wesfarmers would focus on innovation to meet the needs of its customers, managing costs and providing safe workplaces for its employees, Mr Goyder said.

‘‘Our strong balance sheet and commercial capabilities mean we will continue to invest capital and grow our existing businesses, while, as always, continuing to look for further opportunities to create value for our shareholders,’’ he said.

Reuters, AAP

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