Yes,
Coles Myer has an underlying profit increase, but that was a long way from the
actual result, which wasn’t all that flash.

An
early report from AAP shows how. Net
profit after tax up by just 1.6% to $624 million and yet CEO John Fletcher went
to great lengths to highlight the ‘underlying profit’ performance in the press
release.

That
underlying profit was up 17.6% to $678.1 million, so does that mean the company
will be paying its higher dividend of 33.25c on an ‘underlying’ basis, so that
we now have ‘underlying dividends’?

The
spin is easy to understand for as impressive as the turnaround is, Coles Myer is
stalling, the growth in sales and earnings from the Shell petrol office has
slowed to a crawl and rival Woolworths maintains the front position in this
industry in terms of profitability, from sales around $5 billion
smaller.

Woolies
earned $790.5 million after tax, considerably more from that smaller base than
Coles Myer did. Once
Coles rids itself of the millstone called the Myer Department stores, then it
will be fighting at right weight, but still relatively
less profitable than Woolies.

Coles
Myer’s ‘aspirational’ (another Fletcherism) profit for 2006 is $800 million ($769 million
after capital management), whether that is underlying or actual remains the big
question. It certainly confirms that the company is in no condition to really
challenge Woolies and its multi-millionaire CEO, Roger
Corbett.

From
today’s figures from Coles the Megamart disaster cost
$35.8 million for the year, which would have made for a more sparkling set of
profit figures. Myer was also a dog. Sales
rose 2.1% to $3.096 billion. That was an increase of just $65
million.

The ‘retail ebit’ (earnings
before interest and tax) almost halved to $38.7 million from $71.9
million.

The
company’s Carlingford Myer store in Sydney is looking rocky,
falling sales and problems with the centre owner means a $2.6 million write off
was taken post balance date. The ending of the Myer gift voucher process in its
old paper-based form, cost a further $5.3 million.

These
two decisions, totalling almost $9 million, means
Coles is on its way to selling or sharply downsizing (if it cannot sell) the
Myer chain.
It is
being ‘prettied’ up for sale.

Food
and Liquor remain the company’s powerhouse, just as
they do at Woolies, but Woolies still does it better. Woolies ebit from Food and Liquor was $1.1 billion off larger sales
of $26.8 billion, including petrol. Coles
earned $732 million of food and liquor sales of $19.25 billion and $36.8 million
of petrol and convenience store sales of $5.559 billion.

John
Fletcher has done well, but clearly Coles Myer needs a new kick along. Will the
sale of Myer provide that?

Peter Fray

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