As we saw in the March quarter inflation data, few areas of the economy were spared the impact of inflation in the period, with supermarkets taking the brunt of higher costs across the board, from their own to the prices of the thousands of products sold every day.
Supermarket giant Coles Thursday provided a timely confirmation of the ubiquity of the rising cost pressures in a warning to consumers that their costs of living will continue to rise as those inflationary pressures force it to raise prices.
Coles said sales at the supermarket chain rose 3.9% on a comparable store basis to $9.3 billion over the March quarter. Sales growth was higher in January as Covid Omicron hit local activities and spending was directed back online.
But sales slowed as the lockdowns eased and life returned to a more normal pace and people returned to shopping at their neighbourhood stores rather than in CBD and shopping centre locations, where Coles has a stronger representation.
The company revealed in its March quarter trading update that product prices at its supermarket division rose 3.3% from January through to March, a significant jump on the December quarter where Coles reported deflation of 0.2% (thanks to the emergence of Covid omicron in that quarter).
But the price rises suffered by Coles were lower than the 5.3% rise for grocery products in the March CPI report on Wednesday.
Coles explained that many of the price rises it endured in the quarter came from requests from suppliers to raise their prices to make up for increased fuel, raw material and commodity costs, and shipping and supply chain delays.
Coles sees no quick end to this trend and expects price rises from suppliers to continue through the fourth quarter and into the next financial year- hence the warning about the rising cost of living continuing.
The company’s liquor business reported comparable store sales growth of 2.8% for the period. This was driven by growth across all states, despite the impact of the significant flood events in parts of NSW and southern Queensland, as well as WA, South Australia and the Northern Territory.
As well Omicron cases in the early part of the quarter restricted social gatherings and liquor consumption.
Coles Express segment saw same store sales decline of 0.8%, driven by COVID-19 lockdowns
And while traffic flows increased with workers returning to offices and children returning to school later in the quarter, this was offset by the impacts of flood events and global fuel price increases (up 35% in the quarter, according to the CPI report).
Looking to this quarter Coles was sort of confident, revealing that it has started the fourth quarter strongly.
It highlighted that it “recorded a solid trading period with no COVID-19 related restrictions on traditional family events such as Easter” and that “availability continues to improve as the supply chain recovers.”
Coles sees Covid costs but supplier input cost inflation is expected to continue in the fourth quarter and into the 2023 year.
CEO Steven Cain said in the release Coles was trying to provide shoppers with additional discounts and price cuts where it could, but acknowledged the rising cost of living was an issue.
“Coles Group remains focused on our commitment to deliver trusted value for Australian families amid growing cost of living pressures driven by both local and global supply circumstances,” he said.
Coles shares rose 0.6% to $18.47.
