By Glenn Dyer

“Delighting customers” is the new mantra at Coles Myer, according to today’s
profit statement. But despite a solid 15.5% increase in net earnings for the
first half of 2005, shareholders weren’t exactly thrilled.

The strong result was noted in The Australian Financial Review and is detailed in this ASX filing. But there’s no news in the announcement about the future of Myer and the
failing Megamart operation (a poor attempt to take on Dick Smith and Harvey
Norman). Megamart’s losses of $18.5 million didn’t help the overall result, and
investors sold down shares 16c to $9.69 in the first hour or so of today’s
trading.

The real story of the result was the explosion of earnings from Target, up some
61% to $141 million at the retail EBIT level (earnings before interest and tax). And an
impressive 19% rise in retail EBIT from Kmart (to ($89 million) explains the
headache rival Woolworths and its CEO, Roger Corbett faces at Big W with
wallowing sales growth and slow growing earnings.

Myer remains the headache for Coles. Retail EBIT rose only 2.4% to $60.7
million. If Megamart was lumped in, as it was last financial year, Myer would
have gone backwards big time. How long can Coles continue to ‘delight’ customers
and shareholders by keeping Myer intact?

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