By Ian Neubauer
Investors have questioned comments from Wesfarmers managing director Richard Goyder that its Coles Group was beginning to show signs of improvement, dumping thousands of shares and knocking five per cent off their value yesterday (August 21).
The comments accompanied the release of the Wesfarmers’ full year results for the 2007-08 fiscal year, which showed a net profit of $1,050 million — an impressive 33.6 per cent increase on the previous 12 months.
But the result was carried by Wesfarmers’ coal operations and the resources boom, with little improvement shown in the profitability of its newly acquired Coles food and liquor outlets, which are the focus of a full-scale strategic review.
Coles store sales grew only 2.8 per cent in the period — less than half of that recorded by its rival Woolworths.
Goyder said a lot of effort was going into initiatives to improve he operational and financial performance of Coles and that progress had been achieved. This includes the the realignment all former Coles group corporate functions to the Wesfarmers corporate structure, restructuring the previously centralised Coles functions to create autonomous retail divisions, significant reductions in above-store employee numbers, the appointment of new management teams and development of five-year plans and budgets.
“Ian McLeod and his new team are putting in place the structure and strategies required to affect a sustained turnaround in the business and create a much more consumer-focused, value-driven operation,” he said.
But Gowder coulod not disguise the fact that Coles’ turnaround was still in its early stages and changes would take time to bear fruit.
“Results for the food and liquor business for the seven months reflect the fact that we are still in the early stages of a five-year turnaround. As we’ve said previously, the changes won’t suddenly be obvious on a particular day or date, but I continue to strongly believe that the results previously made to date, and the structures being planned, will deliver value to our shareholders and our customers,” he said.
Wesfarmers added 42 new liquor stores and four hotels to the Coles portfolio in the period, and renovated another 99 liquor stores and 27 hotels. It now boasts 95 hotels and 767 liquor stores trading under the Liquorland, Vintage Cellars and 1st Choice superstore banners.
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