By Andy Young
Wesfarmers Limited, the owner and operator of the Coles supermarket and liquor group, has reported a net profit after tax of $1393 million for the half-year ended 31 December 2015.
The group's food and liquor division recorded a sales revenue increase of $937m to $16,469m, which is up six per cent on the same period last year.
Managing director Richard Goyder said the result reflected good momentum in the food and liquor business and that the transformation of Coles Liquor was progressing well.
“The good momentum in Coles’ food and liquor business continued during the half,” Goyder said. “Food and liquor revenue grew $937 million, driven by investing benefits from operational simplification and supply chain efficiencies into better value for customers and improvements in service, particularly over the Christmas period.
“The transformation of Coles Liquor was further progressed with encouraging signs, and over the period included work on price investment, range simplification and store network optimisation. Despite lower fuel volumes and average fuel price, the convenience business produced a solid result, supported by strong growth in store sales.”
Over the six months to 31 December 2015 Coles Liquor closed one First Choice store, opened two and closed one of its Vintage Cellars outlets, while there were 17 Liquorland openings and 10 closures giving the group a total of 954 liquor outlets.
Speaking at the results presentation the managing director of Coles, John Durkan said: "Our customer-led transformation of our liquor business is gaining momentum and our results are progressing in line with out expectations. We have made significant investment in price reduction and range simplification across our three brands and we will continue to do more of this.
"In Liquorland we are continuing with our store renewal program, following encouraging early results. There are now over 170 stores in the renewed format. Customers are responding positively to our initiatives, we have a higher conversion of Coles supermarket customers, improving customer satisfaction scores and transaction growth. However there remains significant opportunity for further improvements.
"At First Choice we still have a long way to go and we're trialling potential new renewal formats."
Wesfarmers said that its retail businesses have good sales momentum, adding that they are "well positioned in an environment where consumers are expected to remain value-conscious and manage household budgets carefully."
The company added: "In strongly competitive markets, the performance of the Group’s retail businesses is expected to be supported by an ongoing focus on delivering further value, better service and improved ranges for customers. Strategies will also focus on merchandise innovation, supply chain productivity, digital engagement and store network improvement."
Goyder said: "The Group’s retail portfolio delivered a strong increase in earnings before interest and tax (earnings or EBIT) of $176 million or 9.2 per cent during the half supported by good Christmas seasonal trading in all businesses.
“Investment in customer value, store network improvement and better merchandise offers and service drove increased earnings across the retail portfolio. Overall, return on capital for the retail portfolio improved strongly as a continuing focus on capital efficiency further leveraged the earnings growth recorded."
While the Wesfarmers retail businesses performed well the group reported a difficult six months for its resources and industrials division, with the short-term outlook remaining "challenging".