It’s official, Coles Group, part of the Wesfarmers conglomerate, is now performing better than its bigger rival, Woolworths.
In fact Coles has a considerable head of steam up, especially its supermarkets business under UK recruit Ian McLeod who says customers continued to respond to Coles’ ongoing commitment to delivering quality, service and value in-store.
"We are now seeing good momentum in Coles as the hard work of the last two years begins to pay dividends," Mr McLeod said in a statement yesterday.
"There has been no silver bullet in our sales delivery; it has been through a combination of improved operating standards, better quality fresh food, improved availability, investment in better value and a stronger focus on customer service."
Woolies, though, which is bigger with a big supermarkets business in New Zealand, plus consumer electronics, is under more pressure now from its smaller rival than at any time in the past 20 years.
That Coles is winning faster sales growth (headline and same store or comparable store basis), tells us that the management is doing better than their rivals at Woolies.
Investors appreciated that stronger performance, pushing Wesfarmer’s shares up 83c or 2.5% to $33.76 yesterday, while selling down Woolies shares, which eased 37c to $28.51.
Figures released yesterday by Wesfarmers in its quarterly sales update revealed the acceleration in sales in the Coles business, especially in the key supermarkets and liquor operation.
Wesfarmers said its retail group saw sales grow 4.27% in the first quarter, which it described as a generally pleasing result.
That was marginally faster than Woolies 4.1% rise in sales for the first quarter, reported on Wednesday.
Total sales for Wesfarmers retail outlets in the first quarter of 2010-11 were worth $11.221 billion, up from $10.761 billion in the first quarter of the prior year (Woolies were $US13.9 billion).
But Coles saw comparable (same) store food and liquor store sales growth of 6.2% in the first quarter of the 2011 financial year, while Woolies recorded same store sales growth of just 2%, a significantly weaker outcome and the biggest gap for years on the most important way of comparing sales growth, between Coles and its bitter rival.
Coles supermarkets reported sales of $7.494 billion in the first quarter, up 4.9% from the $7.145 billion recorded in the first quarter of 2009-10.
Food and liquor grew 5.9% to $5.952 billion from $5.621 billion, and convenience sales rose 1.2% to $1.542 billion from $1.524 billion.
Coles said headline food and liquor sales included the transfer of 22 stores to Foodworks that will impact headline sales growth until the third quarter of the financial year.
Woolies headline sales growth in food and liquor was just 3.2%, and the new Foodworks stores at Coles would not have accounted for all the difference.
Coles experienced food price deflation of 0.3% despite the impact of higher excise on tobacco prices during the quarter.
Woolies said it saw no food price inflation (excluding the tobacco tax increase, 1.8% including it).
Home improvement sales, including Wesfarmers Bunnings stores, rose by 3.9% in the period (which is slower than the rate of sales growth in this business for some quarters) and by 9.1% in office supplies, including the Officeworks chain. That is one of the fastest rates of growth for office supplies and Officeworks for some quarters.
Home improvement sales rose to $1.594 billion and office supplies were up to $360 million.
Kmart saw sales rise by 3.7%, continuing the solid recovery seen in the 4th quarter of the 2010 financial year.
But Target, Wesfarmers second discount chain, saw sales fall by 1.4% on the prior corresponding quarter, which followed a not so hot 4th quarter.
But both chains did better than Woolies Big W division which saw comparable or same store sales fall 2.7% in the quarter.
Wesfarmers managing director Richard Goyder said in the statement that he was "generally pleased with the results", headlined by Coles food and liquor comparable store sales growth of 6.2%.
This was achieved in "a mixed trading environment for the Group’s retail businesses affected by wet and cool weather conditions across most of the east coast of Australia and price deflation," Mr Goyder said in a statement.
He said Wesfarmers’ "turnaround businesses" – Coles, Kmart and Officeworks – experienced "strong sales growth".
"Transaction growth within each of these businesses was a highlight and reflects the continuing hard work of the teams in these businesses to execute their strategic plans and enhance the customer offer," he said.
"Bunnings sales result was pleasing, particularly in the context of the strong growth achieved in the previous corresponding period, and was supported by the further strengthening of its store networks and customer offer.
"Target experienced a challenging period, with continuing price deflation and an extended period of cooler weather in many of its key trading markets impacting new season apparel sales."
Mr Goyder said Wesfarmers was "pleased with the momentum achieved across its overall retail portfolio, evidenced by an increase in transaction numbers across all divisions, as our businesses respond to a value focused and purposeful customer.
"We remain cautious of any n
