Well, Coles Group confirmed what was the worst kept secret in Australian retailing for the past week, its sales grew faster did those of than rival Woolworths in the December quarter and half year.
A week ago Woolies downgraded its 2011 interim and full year profit growth figure to around 5%-8% (against the earlier forecast of 8% to 11%) after seeing a slowdown in sales growth in both the three and six months to December.
At the time quite a few analysts and business writers said that Coles’ would report sales growth of around 6.7% for the second quarter when it reported.
And that’s what happened yesterday when Coles’ owner, Wesfarmers, released its interim sales report for the retailing chain.
Wesfarmers said that food and liquor sales over the second quarter rose 6.7% to $8.814 billion while for the first six months of the financial year sales were up 5.9% to $16.308 billion.
"Coles continues to build on the momentum of its turnaround program delivering food and liquor comparable store sales growth of 6.6 per cent for the second quarter," Wesfarmers chief executive Richard Goyder said in the statement.
"Trading for the quarter, including a very solid Christmas week, was driven by ongoing product innovation, improving store standards and availability and continuing investment in value for customers."
Investors sent Wesfarmers’ shares higher to $34.10 at the opening, despite the overall market being weaker.
But the share price then drifted lower and Wesfarmers’ shares fell at $33.65, but then rallied in late trading to end up 28c at $34.30 after initial impressions from investment analysts were issued.
Woolworths last week said that second quarter sales growth stalled at 4% overall for the half year, including petrol, for the group (3.8% excluding petrol).
Food and liquor, the heartland of Woolies business, saw sales grow 3.7% in the second quarter and 3.5% for the year. Same store sales were 2.2% for the half for the division and 2.5% for the second quarter.
But Coles reported same store sales growth in supermarkets and liquor of 6.4% for the half and 6.6% for the second quarter, both significantly higher than what Woolies reported.
Coles managing director Ian McLeod said the strong sales growth at the supermarkets was very pleasing given virtually flat store space growth during the period.
Mr McLeod said Coles had now recorded ten consecutive quarters of comparable store sales growth giving encouragement to the strength of the turnaround so far and the progress being made on the roll-out of key business initiatives, including over 600 stores now on easy ordering.
"This sales result shows that encouraging progress has been made as we pass the half way point of our five year turnaround strategy but considerable work remains to deliver consistently well for our customers right across the store network," he said in the statement.
However it has to be pointed out that Coles sales growth is off a small base. Coles’ sales in food and liquor totalled $12.99 billion in the six months to December; Woolies were 50% bigger at $18.77 billion.
While Woolworths issued its profit growth downgrade (an important distinction with many people still thinking Woolies’ profit will fall compared with 20010. It won’t, growth will merely be half as good, based on current estimates) Coles and Wesfarmers said nothing about profits.
But the tough trading environment hit Woolies’s Big W chain in particular, which recorded negative sales growth and Kmart and Target were also hit as well.
For the December quarter, sales at Target dropped 4.2% to $1.3 billion while for the first half, sales fell 3.1% to $2.15 billion.
Kmart, which undergoing a revamp did slightly better for the period but was still struggling with second quarter sales up 0.8% to $1.384 billion and half-year sales growth of 1.9% to $2.31 billion.
BIG W’s headline sales were down 2.9% for the quarter and 2.8% for the half year. But on a same store basis, they dropped more than 4% for the half and the quarter, as price deflation, especially on imported items, bit deeply.
Target saw same store sales drop more than 4% for the quarter and 3.3% for the half year while Kmart saw same store sales sip[ 0.6% in the quarter, but they were up 1.7% for the six months.
Wesfarmers former core retailing business, the hardware giant Bunnings saw its sales rise 4.8% for the quarter and 4.4% for the half year.
But same store sales growth were 2.4% for the quarter and 1.7% for the half year as the impact of falling import prices hit home.
Wesfarmers office supplies business, Officeworks, recorded December quarter sales of $346 million, up 4.2%, and half-year sales of $706 million, up 6.6%.
Mr Goyder said he was pleased with how the retail operations had traded during a difficult period for the economy and the continued momentum of the turnaround businesses, especially Coles.
He said second quarter sales results were strong in a period marked by consumer caution, heightened by an increasing interest rate environment and unseasonal wet and cool weather on the east coast of Australia.
"Deflation was evident across all divisions, driven by a competitive retail landscape and strong Australian dollar," Mr Goyder said in the statement.
