Spent a lot of time browsing Coles aisles this past year? Turns out, so did many others! The supermarket giant reported a revenue of $39.4 billion, up 2% on FY21. The boost was credited to strong eCommerce performance in Supermarkets and Liquor cycling.
The vast majority of these earnings were borne by supermarkets while liquor comprised a comparatively minor component. Supermarkets alone accounted for over $34.6 billion of the total revenue, with eCommerce sales growing by 41% to $2.8 billion year-on-year with penetration of 7.9% in FY22, compared to 5.8% in the prior corresponding period.
The eCommerce penetration reached 8.8% in the first quarter of FY22. However, as lockdowns eased and people were able to move around freely again, customers returned to shopping in stores, thus reducing eCommerce penetration in the fourth quarter to 7.4%. Still, eCommerce sales are more than two times pre-pandemic levels.
To add to its supermarket offerings, it also benefited from its Exclusive to Coles range, featuring almost 6,000 products. The Company launched more than 1,300 Coles Own Brand products during the year geared towards lowering the cost of living for customers.
Coles also made the most of the growing reliance on mobile apps. The Supermarket’s newly launched mobile app saw a sales growth of 41%, with the app enabling customers to shop anytime, anywhere, anyhow. Now, owing to the expansion of Click & Collect Rapid, customers can access more than 450 stores (more than 50 added over the year) and same day home delivery to more than 520 stores (more than 200 added over the year).
Coles also tapped into its partnerships, providing additional value for Flybuys members with new customer offers and the addition of Bunnings and Officeworks to the Flybuys portfolio.
Coles Group CEO, Steven Cain, commented, “With Australian families facing increased pressure on household budgets, our commitment to delivering trusted value remains more important than ever.
As examples, we are beginning to see our customers buying significantly more $1 Coles pasta and our $1 coffee at Coles Express has never been more popular.”
Coles Group Chairman, James Graham, echoes this sentiment. He added, “The need for the Group to evaluate and respond quickly to a changing operating environment has never been more important as we focus on ensuring value for customers in an inflationary environment.”
Many of the Company’s initiatives, like the Smarter Selling program, are aimed at addressing the rising cost inflation.
Many external events hurt Coles’ revenue in FY22. For one, the Company incurred COVID-19 costs of approximately $240 during the year, as compared to approximately $130 million of COVID-19 costs incurred in FY21. However, after peaking at approximately $30 million in January, costs significantly reduced over the remainder of the year to approximately $26 million in the fourth quarter.
These costs were primarily felt in the Supermarkets and Liquor segments and largely related to store remuneration, including costs in relation to team member absenteeism, recruitment, rapid antigen testing and more. Coles Express revenue also declined during the year as fewer people left their houses for fuel and travelling as a result of COVID-19 travel restrictions.
Secondly, the floods impacted the supermarket chain, draining almost $30 million from its account, including the loss of stock, asset write-offs and increased freight costs through rail and road disruptions. Thankfully, the Company recovered these losses via insurance in the fourth quarter.
In FY23, Cain is looking forward to the commencement of three out of four automated distribution centres and online customer fulfilment centres. He notes, “[It] will also allow us to drive future efficiencies while delivering an enhanced offer to inspire customers.”
As per its financial year report, FY23 and FY24 will be landmark years for Coles with the proposed commissioning of the four automated distribution centres and online customer fulfilment centres in relation to supply chain enabler Witron and tech provider Ocado.
Alinda is a Business Reporter for The Sentiment
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