It must have been a pleasant surprise for the management, board and
shareholders of Coles Myer. They produce a set of sales numbers over
which there had been some doubt and up go the shares in a sort of
‘relief’ rally that there were no disasters, especially at department
store group Myer.

Myer CEO Dawn Robertson, widely tipped to be on tenuous ground by
analysts, is still there and there seems to be some small shoots of mid
summer growth in Myer sales.

So smiles all around.

Earnings are on track to grow around 18% for the year, to between $670
and $680 million after tax so the track record of CEO, John Fletcher
remains unsullied, despite losing food and liquor chief, Steve Cain just
before Christmas.

But there was a noticeable slowdown in same store growth during the half
with the growth rate slipping in the second quarter to below 5%.

Here’s an early AAP report on the figures
Coles post solid sales rise
and the
company announcement is here.

Coles’ shares were trading around $9.31 in early afternoon trading, up
21c on the day after opening weakly on worries about the report and
retailing generally. But they eased in late trading as analysts started
looking more deeply at the numbers.

Thanks again to the Coles Express petrol offer the headline sales growth
figure was an impressive 17%. But strip those figures out of the
equation and you get more moderate(and slowing) growth of a kind that if
it continues into the third quarter, the slowest of the year, should set
off alarm bells.

Same store sales across the group grew at 4.9% in the six months, but
this disguises the slowdown. In the first half the group figure was
5.4%, in the second half it was 4.5%, which is quite a sharp loss of

Top line sales growth in the important Food and Liquor business of 5.8%
overall in the half, but that too reveals a sharper than apparent loss
of growth. First half top line growth in Food and Liquor was 6.6%, a
pretty solid number, but in the second half it had fallen to only 5.1%,
hence the 5.8% figure for the half.

Rival Woolies drove topline sales in Food and Liquor by around 5% in the
half, so Coles is still doing marginally better.

The story was the same with the key indicator, same store sales, up 3.8%
in the half, which is getting close to the rising rate of inflation in
the community (and not the inflation Coles refers to in its announcement)

Same store sales growth in the first quarter for food liquor was 4.5%,
so there was some slowing in the second quarter, which does contain the
hugely important Christmas New Year period, which is vital to this

There was; by the end of the second quarter same store sales in food and
liquor had grown at 3.1% which in fact is a very sharp deterioration
from the first half.

It was a similar story in the headline-grabbing Coles Express business,
the discount petrol and convenience store chain that saw same store
sales grow 20% in the first quarter, but fall to 16.7% in the second
quarter to produce a half figure of 17.9%.

The story was similar in Kmart, Target but Myer, with Megamart excluded,
grew same store sales slightly in the second quarter. But same store
sales still fell in the half by 0.1%. Not terminal or as bad as the
first quarter performance, but still nowhere near as good as rival David

Megamart remains a dog with the group broken out in the second half to
show a 10.5% drop in same store sales for a fall of 12.5% over the half.

It’s ‘close the business doors time’ pretty soon.

But we are seeing almost constant ‘sales’ promotions from Myer, Target,
Kmart and Megamart at the moment, especially in small and large
electrical and home entertainment products

Compared to Woolworths Coles seems to have a touch more momentum still
in the business, especially food and liquor from the Coles Express
petrol offer. But as Woolies Roger Corbett has hoped, that’s slowing.

Woolies supermarket business saw same store sales grow three per cent in
the first half, up from 2.8% in the first quarter.

Coles Myer has a very different sales mix to Woolies with Kmart and
Target and Officeworks, not to mention Myer in the mix.

Woolies BW discount chain lost ground sharply in the Christmas
period(second quarter) and both target and Kmart experienced a slowdown,
but nowhere near as sharp as Big W where same store sales growth in the
second half slowed to only 1.2%.

Finally the other major recent announcement from Coles Myer was the
retention of Fletcher and some other senior management shuffling
as you can see here.

Coles Myer chairman Rick Allert revealed Thursday why the announcement
had been made, as this AAP report says, Let’s hope that confidence doesn’t take a knock if there’s a
continuation of the sales slowdown from the second quarter into 2005.