Liquor ‘the strongest performer’ for the Coles group

20 February, 2019 by Andy Young

Coles has delivered its first result since completing its demerger from Wesfarmers at the end of last year with CEO Steven Cain saying liquor was the strongest performer in the group.

Overall the group delivered total sales revenue of $20.9bn, up 2.6 per cent on the prior corresponding period in the first of FY19, with EBITs of $733m, down 5.8 per cent.

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For the liquor group total sales revenue was up by 0.6 per cent to $1.7bn with EBITs of $85m, up seven per cent.

Speaking about the liquor group’s performance, Cain said: “The liquor segment’s sales and EBIT result was impacted by New Year’s Eve falling into Q3 this year, as opposed to Q2 in the prior year, despite this EBIT growth was seven per cent for the half.

“Liquor was the strongest performer in the group, with all metrics trending in a positive direction.”

In highlighting where that growth has come from, Cain added: “Our work around promoting exclusive brands is paying off and this category now represents 19 per cent of sales. Average basket size continued to improve driven by general market trends of premiumisation and a favourable mix impact from the spirits category overall.

“Exclusive label brands are growing faster than non-exclusive brands with over 50 new lines launched in the half.”

On a New Year’s Eve adjusted basis, comparable sales growth for liquor was one per cent despite what Cain called “challenging trading conditions” for Vintage Cellars. Cain also said that trading in the second quarter was impacted by unfavourable weather on the Eastern seaboard and WA, relative to the prior year. This in turn impacted transaction growth, particularly in the beer and RTD categories, however he said that transaction growth increased in December across all brands, particularly over the key Christmas period.

He added: “Liquorland continued to be the strongest performer in the segment during the period, through our continued focus on range, exclusive brand innovation and providing more convenient solutions to customers through click and collect, same-day and next-day delivery.

“Gross margin increased by 10 basis points to 28.3 per cent primarily due to margin improvements from the exclusive brand expansion and improved supplier collaboration.”

Coles also said that it is continuing to rebrand its First Choice network to First Choice Liquor Market, which has resulted in “improved trading and positive customer responses around a refreshed range and lower prices”.

Part of the five-year transformation for Coles Liquor has been renewing the Liquorland stores and this has been a key focus over the last few years. Eighty per cent of the group’s Liquorland stores have now been completed and Cain said these stores are “delivering on our expectations”.

Cain also said that online successes seen by the group as a whole have been replicated in liquor with online growing at around 30 per cent, helped “by growth in click and collect”.