The Coles Group Ltd (ASX: COL) share price is down over 5% after reporting its FY23 report.
Coles share price
FY23 result
Here’s the result for the 12 months to 25 June 2023.
- Continuing operations (CO) sales revenue up 5.9% to $40.5 billion
- CO EBITDA (EBITDA explained) rose 3.8% to $3.38 billion
- CO EBIT increased 1.8% to $1.86 billion
- CO net profit after tax (NPAT) fell 0.3% to $1.04 billion
- Final dividend per share of 30 cents, same as last year
- Total dividend per share up 4.8% to 66 cents
Coles revealed that in the fourth quarter, supermarket sales increased 8% and liquor sales increased 2.9%. Fourth quarter supermarket inflation was 5.8%.
It was successful with its smarter selling target of $1 billion in cumulative benefits, with $220 million delivered in FY23.
Despite that, the company’s profit margins declined following higher operating costs relating to its new distribution and customer fulfilment centres (and delays). It’s also hurting after large rises to its financing costs and wages. These are obviously negatives for the Coles share price.
Leadership commentary
The Coles Chairman James Graham said:
It is pleasing to record continuing sales growth and broadly stable after-tax profits from continuing operations in another
year marked by challenging operating conditions. The payment of a steady final dividend of 30 cents per share is in line
with our 80 to 90 per cent full year dividend payout policy.During the year there have been many highlights including achieving our highest ever team member engagement score
amongst our 120,000 team members, reaching our target of 40% women in leadership and opening our first Automated
Distribution Centre at Redbank in Queensland.As we look forward to our 2024 Financial Year, we have a strong leadership team with our recently appointed CEO, Leah
Weckert, and a number of significant new appointments ensuring we are well placed to meet our aim of building trust
and creating long-term shareholder value.
Outlook for the Coles share price
Coles said that cost of living pressures are “likely to remain”. In the early part of FY24, supermarkets volumes have remained “modestly positive” compared to last year, and it’s seeing early signs of customers shifting out of home dining.
Overall inflation is moderating, but inflation in bakery, grocery and dairy has remained consistent with the fourth quarter.
Coles has seen an increase in stock loss, including theft, so it’s increasing security at ‘high risk’ stores.
The company is expecting to open a net nine new stores in FY24, which will hopefully be a boost for sales and earnings.
The Victorian payroll tax increase is going to cost $20 million per year, while the Fair Work Commission increase to wages will mean store remuneration will grow by 5.75%.
