Coles posts $1.1bn profit amid grocery price surge and cost of living crisis

Supermarket operator Coles has recorded a surge in revenue from its groceries business, even as steep living costs prompt households to alter shopping habits and store theft escalates.

Australia’s second biggest supermarket chain posted a 4.8% rise in full-year annual profit to $1.1bn, supported by its strong food business which more than offset subdued liquor sales.

The results show that Coles not only used the pandemic and recent inflationary period to profit from sales but also made more money from each sale, expanding its supermarket profit margins.

The Coles chief executive, Leah Weckert, said households were engaged in careful meal planning, scouting for cheaper brands and were “stretching out” the time between purchases of cleaning products and other non-food items.

“What I would probably say is they’ve been really savvy shoppers,” said Weckert, who delivered her first annual result at Coles after taking over as CEO earlier this year.

“They know how much they have to spend and they know what they want to achieve out of it.”

Younger families and people aged under 34 were under the most severe budget pressures, Weckert said.

Coles generated $36.75bn in revenue from its groceries business in 2022-23, up more than 6%, in a period where sales volumes were only “modestly positive”, according to the company.

Supermarket prices increased by 6.7% and Coles recorded strong sales of staples such as pasta and rice, which have proved popular during a cost-of-living crisis. While the price of some fresh food and meat items have started to fall, most items are still recording rises.

“At this stage we are saying that there are a number of categories which are still at elevated levels of inflation like dairy and bakery,” Weckert said.

The financial books did not, however, meet shareholder expectations, with Coles shares falling more than 5% early on Tuesday after investors reacted to the results.

Analysts were unimpressed with rising costs at Coles, which notably includes a 20% increase in stock losses due to rising organised retail crime and customer theft tied to cost-of-living pressures.

Coles shoppers can now expect more scrutiny at self checkouts, including the use of uniformed and covert security guards along with camera and AI technology to ensure items are correctly scanned.

“What we’re really focused on now is putting in place a number of initiatives which will help us to address the issue, including security solutions in the store,” Weckert said.

The company said theft levels are now so high that it is weighing on its profitability, which partly explains the decision by investors to drive the share price lower.

Coles was still able to record a modest increase in gross profit margins for its supermarkets division, which it told shareholders was a sign of financial strength.

The profitability of Coles and Woolworths, which control a combined two-thirds of the sector, will be closely watched by parliamentary members and unions, which are both running inquiries designed to scrutinise the sector’s pricing decisions amid a steep rise in living costs.

Australia’s biggest supermarket chain, Woolworths, is scheduled to report its financial results on Wednesday.