Coles slipped out a surprise early earnings update yesterday which told us more about corporate spin than anything else.
The country’s second-ranked supermarket chain said a bumper Christmas performance will help it trump first-half earnings forecasts from analysts, even though the actual figure will be down on the first half of 2018-19.
Coles said its earnings before interest and tax (EBIT) for the six months to December would be between $710 million and $730 million – down on $733 million earnings in the first half of 2018-19 but easily topping the $660 million to $690 million market forecast.
Coles said the result was due to strong supermarket sales in the holiday season (although the December retail sales data tells a different story – see separate story). That helped offset margin pressure at the company’s liquor division.
CEO Steve Cain said the company’s major supermarkets division delivered comparable sales growth of 3.6% in the second quarter – up on guidance of about 2.2%.
This will give Coles’ first-half comparable sales growth up to 2.0%.
The company’s official first-half figures will be released on February 18 will also be helped by a number of one-off earnings gains, including $33 million from property sales, and $15 million via a worker’s compensation self-insurance release.
Directors also said that the costs of the removal of plastic bags and increased Flybuys promotions a year ago have also cycled through, and will further boost profit for the period.
Coles though did warn liquor earnings in the first half had suffered as a result of margin pressure, while also being impacted by clearances and discounting.
However, comparable first half liquor sales are still expected to improve from a 0.1% decline a year ago, with a 1.5% growth figure for the December half.
Comparable first-half sales growth at the company’s service station and convenience store division were up 2.9%.
Coles shares rose close to 2% to as high as $16.97. Investors took another look at the shares and the fell back to end the session up just 0.1% at $16.63.
