Australia’s second largest supermarket chain, Coles, has logged an annual profit of $1.1 billion. That’s an increase of net-profit after tax of 4.8% compared to the previous year’s $1.048 billion.
Bitter pill to swallow
CEO and MD at Coles Leah Weckert addressed concerns from customers during a media briefing this week. Customers have continuously voiced their frustration about the high cost of living. The 4.8% profit might be seen as a bitter pill to swallow for these customers. Consumers have to bear the brunt of high inflation and suppliers’ price hikes, which are passed on to them.
“Over the last few months I had a chance to listen to many of our customers talk about the disadvantages they are experiencing with the cost-of-living. We know from our research that our customers are becoming more value continuous, with many worried about their ability to cover costs, particularly young families and those under 34,” acknowledged Weckert.
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“Eating out, take-aways and coffees from the cafe, are increasingly being seen as treats for a special occasion. Customers are looking at the supermarket hoping to do more with their budget. They are looking for more specials, more affordable brands,” Weckert said.
As a result of this, many customers are now turning to an omnichannel experience. Customers research certain products online while inside a store. This is to ensure they grab the best deal, cheapest product or best value for money.
Weckert assured customers that the tough economic climate is not unique to Coles. She said it has been noted across retailers in Australia and abroad for the past year or so.
Down to the numbers
The group has recorded a sales revenue increase of 5.9% to record $ 40,483 billion in the full financial year end of 2023. The group’s adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) and EBIT from continuing operations, increased by 5.3% and 4.5% respectively. This excludes major project implementation operating expenditure and a $25 million provision taken in FY23.
When focusing specifically on the grocery arm of the business, Coles produced a revenue of $36.75 billion in the last financial year. Its Exclusive to Coles brand has recorded a healthy 9.6% increase, while the Exclusive Liquor brand grew by 8.5%.
Stock theft disrupts profitability
Coles is facing a challenge which could be directly linked to the high cost of living experienced worldwide. “Total loss has emerged as a cost headwind increasing ~20% year on year,” the company reported. Key drivers of elevated stock loss include increased levels of organized crime and theft.
To fight shoplifting, Coles is turning to technology and the authorities to help curb this criminality. This trend has mostly been noticed towards the second half of the 2023 financial year. With its stores operating as self-checkouts, it’s implementing stricter processes and re-training staff to reduce the risks involved.
The problem is not unique to Australia, said Matt Swindells, chief operations and sustainability officer: “We are all facing the same problem.”
Coles is one of the first supermarkets to implement safety measures at paypoints to reduce theft. “We were the first to implement smart-gates that prevent a customer that hasn’t paid for their goods to exit the stores. The second is trolley lock. Someone can fill a trolley and try to exit. The trolley’s wheels are just locked. That’s been very successful,” Swindells said. The group is now also rapidly rolling out SkipCam software. “With the process of self-checkouts, AI and camera technology will prompt the customer to go back if they failed to scan an item.”
Coles is now using data-analytics to try and identify trends in its operation where they may not immediately see a problem regarding stock loss. “With the use of Artificial Intelligence we can flag-up where the team can go and investigate both external and internal theft. We continue to drive even harder as we try to get ahead of this problem. Once again, this is an industry issue, one around the world,” said Swindells.
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