Australia’s Coles profit beats forecasts as cost control pays off

Customers separated by protective plexiglass shields are seen in the self-service checkout area of a Coles supermarket following the easing of restrictions implemented to curb the spread of the coronavirus disease (COVID-19) in Sydney, Australia, June 17, 2020. REUTERS/Loren Elliott

Feb 22 (Reuters) – Australia’s second-largest supermarket chain Coles Group (COL.AX) on Tuesday posted better-than-expected first-half profit, as it controlled pandemic costs and its earnings were boosted by lockdown-induced consumer spending.

Its shares rose 2% to A$17.05 in early trading, as it also said its expenses had moderated lately after it shelled out A$30 million ($21.6 million) in COVID-19 costs in January.

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Coles and larger rival Woolworths have banked on demand from shoppers confined to their homes as they bought everything from groceries to toilet paper in bulk, but have borne extra expenses due to disruptions caused by lockdowns.

Coles’ Supermarkets business, its biggest earnings contributor, saw comparable sales grow 1.5% in the half, as curbs in New South Wales, the Australian Capital Territory and Victoria elevated demand and margins.

“As Omicron spread through the community in the early part of January, Supermarkets sales were elevated before moderating later in the month,” it said.

The company, which operates more than 800 stores in Australia, said half-year net profit after tax fell 2% to A$549 million ($394.8 million), but beat an estimate of A$517 million from Jefferies, which called it “a solid, clean result”.

Coles declared an interim dividend of 33 Australian cents per share, in-line with last year.

It said lockdowns in Melbourne had delayed construction of its customer fulfilment centre in the city by a year and it was now expected to open in fiscal 2024.

While COVID-related costs jumped A$45 million in the half, it said that expenses had now moderated, but trimmed its annual capital expenditure forecast due to construction delays.

It now expects to spend between A$1 billion and A$1.2 billion, compared with A$1.2 billion to A$1.4 billion forecast earlier.

($1 = 1.3904 Australian dollars)

Reporting by Harish Sridharan and Shashwat Awasthi; Editing by Aurora Ellis and Sam Holmes

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