How did Coles Group (ASX: COL) performed in 1H FY2023?

Key Highlights:

• Coles Group reported 3.9% growth in its 1H FY2023 results.
• The NPAT improved by 11.4%.
• Coles announced the interim dividend of AU 36.0 cents.

Coles Group Limited (ASX: COL) has released its 1H FY2023 results. During this period, the Company made progress in growing long-term shareholder value by executing its strategies. Some key developments during this period were:

• It delivered several ‘DROPPED & LOCKED’ prices to help keep inflation below the national average, an enhanced Flybuys program, and free glassware in Supermarkets, together with its popular Price Drops campaign in Liquor.
• It expanded Supermarkets eCommerce immediacy offer through Rapid Click&Collect, available in nearly 400 stores, and launched a unified website. With this step, many of Coles’ customers could shop at their convenience. 
• It progressed the two Ocado eCommerce automated customer fulfilment centres. The external building work is completed. However, grid build and automation fit out are underway. Once it gets completed, Coles could provide industry-leading Delivered In Full On Time (DIFOT) deliveries to customers.
• Another significant progress in 1H FY2023 was that the Company expanded its local and Exclusive Liquor Brand portfolio. This segment delivered eCommerce sales growth of 14% with an immediacy offer launched & accessible in over 560 stores.
• In NSW, TAS, and SA, the Company expanded Coles Finest certified carbon-neutral beef range to customers.
• It accelerated investment in “Coles 360” to support FMCG businesses in creating sustainable growth via more meaningful links between customers and their preferred brands.
• Besides the above progress, Coles announced the sale of Coles Express to Viva Energy for $300 million. Coles Express is among Australia's leading fuel and convenience retailers, with 723 stores and more than 4,800 team members to support its customers. With the decision to sell this business unit, Coles will be able to focus more on growing the omnichannel supermarket and liquor businesses.
• It rolled out Fresh Produce Easy Ordering to ~300 stores. Thus, enabling better availability as well as freshness for customers via AI technology.
• It opened ten new supermarkets during the period. It includes the first Coles Local in Western Australia and 15 Supermarket format renewals.

1H FY2023 performance highlights ( 27 weeks to 1 January 2023):

• Sales revenue increased by 3.9% to AU$20,805 million.
• EBIT grew 9.9% to AU$1,058 million.
• Net profit after tax improved by 11.4% to AU$616 million.
• Announced interim dividend of AU36.0 cents. It increased by 9.1% compared to the previous corresponding period.

Outlook:

In the March 2023 quarter, the Supermarkets volume growth returned to modestly positive from mid-January. The Company highlighted that there will be supplier input cost pressure, especially related to packaged goods, wages, and energy. At the same time, inflation might moderate from the peak levels in Q2 as COL starts to cycle 2H FY2022 inflation and farm-linked availability improves.

• In liquor, COL expects its earnings to return to growth in 2H FY2023. It will focus on building sales momentum, partly aided by the February excise increase and continuing to drive Exclusive Liquor Brand growth.
• Through its Smarter Selling program, COL expects to help partly offset inflationary cost pressures, headwinds in mark downs, and stock loss due to growing theft. It will help the Company to reinvest in the business.

Coles is well-placed to navigate the present macro environment. In the coming days, the Company expects improved availability, population growth, and moderation in out of home dining. These will positively impact the business and provide further growth opportunities in the coming period.

Also Read: Coles Group announced the appointment of Leah Weckert as Managing Director and CEO

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