Coles LiquorBusiness

The new normal for Coles Liquor sales post-COVID-19

Coles Liquor sales revenue was $2 billion for the first half of FY23, a decline of 2.4% as the business cycled approximately 15 weeks of COVID-19 related on-premise closures and restrictions in the prior corresponding period across Victoria, NSW
and the ACT.

For the second quarter, comparable sales growth decreased by 0.9% relative to a decrease of 4.1% in the first quarter, reflecting a reduction in on-premise restrictions from the prior year throughout the quarter, and the impact on sales revenue of what the retailer described as “supplier led cost price increases for a full quarter across the beer, sprits and Ready-to-Drink (RTD) categories”.

In addition to cycling the COVID-19 on-premise restrictions in the first half of the prior year, sales were impacted by weather
events, including store closures from flooding in NSW, Victoria and Queensland (impacting seven stores at its peak during the half), and a relatively wet and cool spring and start to the summer season on the Eastern seaboard.

Despite this, Coles said liquor delivered its strongest ever Christmas and New Year period.

Coles said that in the first half, sales revenue growth was positive, excluding the lockdown states of Victoria, NSW and the ACT.

On a three-year basis, liquor sales revenue increased by 15.4% for the first half and 15.5% in the second quarter, which was broadly consistent with the first quarter of 15.2% growth.

Coles said the result was underpinned by the “successful execution of liquor’s strategy to ‘be a simpler, more accessible and locally relevant drinks specialist’, with the Liquorland Black and White transformation continuing to resonate with customers”.

It attributed the results to the delivery of value, particularly through the Exclusive Liquor Brands (ELB) portfolio and growth in eCommerce sales.

eCommerce sales saw revenue growth of 13.7% on the prior period and penetration of 5.6% in the first half (6.8% including Coles Online) compared to 4.8% in the prior corresponding period (5.6% including Coles Online).

Express delivery was expanded and is now available in more than 560 stores. Capacity also increased through the roll out
of Click & Collect (to the boot of car) in more than 70 First Choice Liquor Market stores.

ELB and local sales continued to gather momentum with more than 200 new ELB and over 520 new local lines added in the half. More than 280 awards across the ELB portfolio were also received, including James Busby ‘Vineyard Series’ Pinot Noir awarded the ‘Best in Show’ trophy at the Royal Adelaide Wine Show.

Liquorland continued to be the strongest performing banner with more than 370 Black and White Liquorland stores now

RTD was the strongest performing category during the period.

Coles Group CEO Steven Cain said: “We continue to make progress on growing long term shareholder value by executing our strategy, whilst recognising the significant ongoing challenges facing many of our customers and suppliers.

“Coles continues to be one of Australia’s most trusted brands and for our customers, we delivered hundreds of ‘DROPPED
& LOCKED’ prices to help keep inflation below the national average, an improved Flybuys program, and free glassware
in Supermarkets, alongside our popular Price Drops campaign in Liquor. The good news is that supplier cost inflation is
starting to ease in the third quarter, particularly in produce.

“Many of our suppliers are however still facing increasing cost pressures and shortages of pallets, raw materials and labour.
This has been coupled with increased severe flooding impacting our road and rail networks, particularly for Western
Australia and Far North Queensland.”

Coles liquor sales outlook for second half

Coles said it expected earnings to return to growth in the second half as the Group exited COVID-19 cycling and focus on building sales momentum, which it said would be partially assisted by the February excise increase and continuing to drive ELB growth.

“Our Smarter Selling program will continue to help partially offset inflationary cost pressures, headwinds in mark downs and
stock loss, as a result of increasing theft, and allow us to reinvest in the business,” the Group said.

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