Cost of living pressures and stronger competition in the supermarket sector have slowed supermarkets sales growth at Coles, sparking a share price plunge that wiped about $3 billion off the company’s market value.
Shares in the supermarket giant plunged 10 per cent shortly following its latest quarterly results as the company said it expected to incur additional fuel-related costs in coming months.
Coles’ supermarkets sales revenue grew 3.6 per cent to $10.3 billion in the three months to September driven by strong eCommerce growth and partly offset by more fierce competitive and promotional activity.
The company flagged that customers remain value-conscious, cross-shopping across retailers and channels and making the most of promotions and loyalty programs amid cost of living pressures. It also said high fuel costs would add to its expenses and it expected first-half supermarket profits to be flat compared with the prior period.
”Customers are really feeling the pressure on their household budgets,” Coles chief executive Leah Weckert said on a media call following the results.
“They’re really seeking out value now by buying more specials and they’re using their loyalty points. As we come into Christmas...there will be more meals eaten at home, less going out.”
Citi analyst Adrian Lemme said Coles’ guidance of flat profits in the supermarket business compared with Citi’s previous forecast for 8 per cent growth, and the numbers pointed to a loss of momentum compared with arch rival Woolworths.
“The downgrade appears to be driven by price investment as supermarket sales have clearly been impacted by Woolworths’ pricing strategies,” Lemme said.
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