Coles breaking records and (finally) smashing ceilings

Company News

by Glenn Dyer

Supermarkets giant Coles (ASX:COL) has appointed its first female CEO in its 100-year plus history after reporting a cost cutting-driven record interim profit of $643 million.

Earnings for the December half jumped 17.1% from a year earlier and has set Coles up well to handle a forecast slowing in spending by consumers shell shocked by the 9 rate rises from the RBA since last May and high inflation.

The company said the earnings figure resulted from its continuing cost reduction campaign which helped support a solid 9.1% rise in interim to dividend to 36 cents per share.

Revenue for the six months to December rose to $18.85 billion from $18.58 billion a year earlier (excluding non-continuing businesses).

Coles’ cost reduction program, Smarter Selling, produced benefits of about $100 million in the December half and helped offset the negatives from higher energy and other costs, the impacts of floods and rain and major rail problems (in Queensland).

Coles core supermarkets business saw earnings before interest and tax jump 10.6% to $991 million at a margin of 5.3% – an improvement of 28 basis points in the face of the cost pressures from energy and higher supplier prices.

A big positive though for Coles was the sharp slide in Covid-related costs from a year earlier when many states were still operating under restrictions.

Coles said Covid-related costs totalled $20 million in the six months to December, as compared with $150 million a year ago helping it offset supplier cost inflation and supply chain challenges.

Coles surprised though in naming as its new CEO Leah Weckert, a senior member of its executive leadership team, upon the retirement of Steve Cain in two months.

Steven Cain will stay for a while to help the transition to the new CEO. Ms Weckert takes the CEO’s position from May 1.

Since 2011, she has held the positions of Chief Executive, Commercial and Express; Chief Financial Officer; People and Culture Director; and State General Manager, Victorian Supermarkets, as well as being a senior member of the Executive Leadership Team since the demerger of Coles from the Wesfarmers Group in 2018.

Ms. Weckert holds degrees in Engineering and Science from Adelaide University and a Master of Business Administration from Harvard University. Ms. Weckert’s prior business experience includes roles at McKinsey & Company and Foster’s Group.

Coles’ James Graham said in Tuesday that Ms Weckert “has an outstanding track record of leadership and driving change inside Coles across key operating areas of the business. I am confident that Leah will maintain the focus of Coles in driving our strategy, building trust with all stakeholders and growing long term shareholder value.”

Steve Cain has been CEO since joining in 2018 and steered the Group through demerger from Wesfarmers and then the long Covid pandemic.

The chairman said “Steve’s leadership through the challenging Covid period saw Coles play a most important role in meeting essential community needs, increasing our reputation with key stakeholders and keeping customers and team members safe.

“In addition during these last five years we have seen significant development of our portfolio with the material expansion of our online business, the reshaping of supermarkets’ store formats and the expected near term completion of the sale of Coles Express.”

She will oversee the final two months of Coles’ 2022-23 financial year, but the results will be down to the policies that the departing CEO put in place, especially the cost cutting program and especially the investment in keeping price rises as low as possible by ‘locking down’ prices on a range of more than 200 essential products for six months to more.

Looking to the rest of the year, Coles said it sees inflation easing from the December quarter – when its supermarket saw 7.7% inflation. However, it sees itself well placed to ease the impact of cost-of-living pressures on Aussies’ wallets, saying:

“With the largest Own Brand portfolio in Australia, ‘DROPPED & LOCKED’ prices, and Australia’s favourite loyalty program, Flybuys, we are well positioned to meet the increasingly diverse requirements of our customer base.”

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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