Have no doubt; Coles Group continues to run rings around rival Woolies, no matter what anyone says.
And yet the market only pushed Wesfarmers shares up 1.4%, or 47c, to $33.47 yesterday after the Coles sales announcement, which was the strongest sales growth figures for years.
That put the shares $1.80 under the year high of $35.26 hit after the half year profit and sales update in February.
Woolies’ shares edged up 5c to $26.53, more in hope rather than anything else.
There was nothing positive for Woolies from the Coles announcement; its rival is getting much faster growth than it is in a retail environment that is still soft.
And yet there’s clear evidence that the sales performance in Coles’ supermarkets continues to get better, although the lack of sales growth in Target and Kmart mirrors the weakness being reported by the likes of Myer and David Jones.
Food and liquor remains the driving force for the group’s improvement, driven by CEO Ian McLeod.
In the 12 weeks to the end of March, Coles lifted its comparable store sales figures in its food and liquor division 7.2%, which is more than double Woolworths’ 3.3% rise (over 13 weeks).
The March quarter was the seventh consecutive quarter where Coles has outperformed Woolworths in percentage terms, and the sixth consecutive quarter where it has beat them in absolute dollar terms.
And given that Woolworths has 20% more floor space than Coles, the outperformance is even greater.
Coles is starting to close the gap on Woolies and although there are billions of dollars in annual sales still to be made up, the momentum is clearly with Coles.
Coles owner Wesfarmers has reported a 7% rise in quarterly sales in its supermarket chain, as it says price deflation particularly in non-food retailing continued to affect results.
Wesfarmers said Coles supermarkets recorded third quarter sales, to the end of March, of $5.852 billion, up 7.1% on the third quarter of the 2009-10.
That’s faster than the 5.1% rise in headline sales at Woolies (for the entire business) and 5.6% for the supermarkets and liquor businesses.
Sales in Wesfarmers convenience store network in the quarter were $1.626 billion, up 12.1% (thanks to those higher petrol prices). Headline sales excluding petrol were up a much softer 2.9% in the quarter.
Sales at Wesfarmers home improvement chain, Bunnings, rose 8.1% to $1.669 billion (5.5% up on a comparable store basis).
Target suffered a 0.1% drop in sales (but up 0.5% on a comparable store basis) and Kmart saw a 2.5% fall (down 3.3% on a comparable store basis).
Wesfarmers managing director Richard Goyder said in the statement the sales results were "generally pleasing", particularly the results in Coles and Bunnings.
But he said "trading conditions continued to be affected by significant price deflation, especially in non-food retailing, as a result of further strengthening of the Australian dollar and strong competition as retailers undertook clearance activity on summer seasonal stocks".
Mr Goyder said Wesfarmers was pleased with progress made by all divisions on improving operating standards, delivering better value to customers and enhancing the customer experience.
"All retail divisions continue to invest in their store networks to ensure that they are well positioned for future growth," Mr Goyder said in yesterday’s statement.
Coles said it recorded flat food and liquor price inflation in the third quarter, despite the impact of higher excise on tobacco prices and the impact of recent floods on fresh food prices.
Excluding the effect of higher tobacco excise, Coles recorded food and liquor price deflation in the quarter of 1.4%.
In the financial year to date, food and liquor price deflation including the impact of higher excise on tobacco prices, was 0.1%, and 1.6% excluding the impact of the tobacco excise.
Coles managing director, Ian McLeod, said the third quarter result represented continued progress in the chain’s five year turnaround strategy.
"Coles has worked hard with our suppliers to produce better quality products as well as responding to customer concerns about animal welfare and ethical sourcing.
"Coles has responded by removing added hormones in our beef, moving to phase out caged eggs by 2013 and moving to phase out sow stall pork by 2014.
"‘Higher levels of trust in quality and sourcing programs have been rewarded with higher levels of fresh food sales as a result," Mr McLeod said.
Elsewhere in Wesfarmers group, the company warned that the flooding and bad weather would take a greater toll on its insurance arm.
"At Wesfarmers’ half-year earnings announcement on 17 February 2011, it was reported that claims associated with severe weather and flood events across Australia during January and early February would impact the Insurance division’s earnings by approximately $30 to 35 million.
"Following this announcement, the impact of the second Christchurch earthquake, further claims development from the earlier severe weather events and costs of reinstatement premiums on the catastrophe reinsurance program will result in a further impact to the Insurance division’s earnings in the order of $40 million.
"The Insurance division’s current net retention per event under its catastrophe reinsurance program is $15 million and the division reta
