Coles shares plunge as rival promotions curb early Q2 sales
Australia's second-largest supermarket chain saw its shares drop sharply after reporting slower sales growth in the first four weeks of the second quarter, citing heightened competition and higher fuel costs.
Coles Group said that intensified promotional activity from competitors led shoppers to compare prices across retailers and rely on discounts and loyalty programmes to stretch household budgets. The company reported that supermarket sales growth slowed in the first four weeks of the second quarter, falling short of the 3.6% rise recorded in the first quarter that ended on September 27.
To counter the trend, Coles announced "deliberate actions to strengthen momentum," including a relaunch of its Every Day Price programme, which guarantees lower prices on selected items for at least six months to attract value-focused consumers.
"Past collectibles campaigns, including Coles' own, have only lifted sales temporarily, and Woolworths is not standing still ... Christmas trading will be the real test," said David Tuckwell, chief investment officer at ETF Shares, describing the trading update as soft.
The retailer also warned of higher fuel-related expenses in the first half of the year due to recent price increases, expecting first-half supermarket earnings before interest and taxes to match the same period a year earlier. Total group sales revenue for the first quarter came to A$11.21 billion, below Visible Alpha's forecast of A$11.31 billion and down from A$10.96 billion a year ago.