Coles CEO Leah Weckert says Coles’ profit margins have not matched the surge in food inflation. And now she’s opening up a gap to her great rival, Woolworths.
over the last few weeks, Coles chief executive Leah Weckert arrived at her December half results announcement with her line of defence fully prepared: profit is no bad thing“Profits are an essential thing for any business,” Weckert began, before explaining that it allows Coles to employ 120,000 people, support 8000 suppliers and pay “a very large tax bill”. Then there are shareholders, including hundreds of thousands of mums and dads, and millions of super fund members.
What’s more, Weckert argued, food inflation in Australia has remained lower than in the US, the UK, Europe, Canada and New Zealand because of what she described as a vibrant retail sector, where shoppers can usually pick from two or three supermarkets and a range of specialty food providers. Of course, Weckert did so well to talk down Coles’ profits – and particularly, its inability to boost margins over the long term – that those hundreds of thousands of investors could have been forgiven for wondering if their hard-earned savings are invested in the right place.but underlying EBIT of $1.1 billion was 5 per cent better than the market expected. And while EBIT in the core supermarkets fell to 5.1 per cent from 5.3 per cent in July-December, that’s much better than the 3.
Weckert dismissed this suggestion, arguing the difference between the sales performance of Coles and Woolies is down to three factors: better availability of products including chicken, eggs, water and soft drink compared with last year; the fact Woolworths isn’t running a kids’ collectables campaign this year; and the targeted success of a new discounting campaign launched in early January.
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