Two households, both alike in dignity, in fair Tooronga, where we lay our scene…

Twelve months ago, the results for Coles and Myer were part of one announcement. Next week, we will see two very different stories being told when Coles presents on Monday, followed by its former sibling on Tuesday.

So what’s to be expected?

Accounting periods that are staggered by a month provide a window on what to expect from Coles. Woolworths numbers were released four weeks ago, with strong growth in sales (16%) and net profit (28%). We could reasonably assume this growth wasn’t at the expense of Dimmeys, 7-Eleven or IGA. The writing was on the wall for Coles.

Yesterday Macquarie Bank and UBS retail analysts slashed their Coles profit forecasts, further widening the gap between current expectations and the $1.06b profit target set by the Coles board during their last KKR defence.

Expect a Coles presentation full of spin in a desperate attempt by the current leadership to retain a skerrick of credibility and keep some upward pressure on the share price. It now also seems that Coles will unveil their preferred divestment strategy.

There have been suggestions that Coles may shed Officeworks and Target, and keep the grocery, liquor and Kmart businesses together. The big unit may be auctioned or retained, with or without private equity involvement. A listed Coles would be a poor outcome. Coles needs new leadership capable of rebuild the company, and this is probably best done without the scrutiny, reporting requirements and short term market expectations that travel with listing.

The Coles share price is rising again, yesterday poking its nose above $16 for the first time. The leaders will be pleased. However we all know this is about takeover expectations rather than performance. It’s the sharemarket equivalent of a one bedroom fibro beach shack being sold for millions because of a water view. And like the shack, Coles needs to be pulled down by the new owners to build something worthwhile.

Everything points to the Myer result being much more pleasant reading and we should expect an upbeat, smiling and optimistic leadership.

The difference between the two results will be the consequences of a marvellous rebuilding of the culture, vision and values at Myer, mirrored by a toxic culture, a lack of vision and (if we are to believe recent reports of fudged numbers) a tragic set of values.

My wife still owns 762 Coles shares.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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