The Coles Group Ltd (ASX: COL) share price is under the spotlight, and slightly down, after reporting its FY24 third quarter sales.
FY24 Q3 sales
Coles reported that its supermarket sales grew by 5.1% year on year to $9.07 billion, while liquor sales dropped 1.9% to $786 million.
E-commerce sales were up 34.9% to $856 million in the supermarket division and up 4.1% for the liquor division.
Revenue of $182 million was reported for the third quarter of the “other” segment, which relates to the product supply agreement with Viva Energy Group Ltd (ASX: VEA) which commenced on 1 May 2023 after the divestment of the Coles Express business.
This led to total sales revenue being up 3.4%.
The Coles CEO Leah Weckert said:
We remain committed to providing our customers the best possible value on their grocery bills. We are well positioned in the current economic environment as we continue to invest in value, including through our Autumn value campaign with the prices lowered on 300 products in store and online. Our recently launched KitchenAid Ovenware campaign provides additional value to customers who will be cooking more at home through the cooler months. Looking forward, I believe that the opening of our Kemps Creek Automated Distribution Centre and our two CFCs will be yet another step on our road to improving operating efficiency and differentiating our offer.
Supermarket highlights
Excluding tobacco, sales revenue rose even more strongly, with an increase of 6.6%. ‘Exclusive to Coles’ sales revenue increased by 8.8% to $3.1 billion, with “strong volume growth”. I think these are promising measures for the Coles share price.
Coles has been working hard on inflation, lowering prices on more than 300 products. Total inflation at the supermarket was 2.2%, down from 6.2% in the third quarter of FY23. Packaged inflation has been moderating, while there has been deflation in the fresh category. Inflation excluding tobacco and ‘fresh’, inflation was 2.9%.
Within the fresh categories, fresh produce and meat remain in deflation, driven by fruit (particularly apples and avocados) and red meat (particularly lamb).
During the quarter, Coles renewed 11 stores, opened two new stores and closed one store, taking the total to 851 supermarkets.
Outlook for the Coles share price
Coles revealed that for the early part of the fourth quarter, volumes at supermarkets had remained “positive”, underpinned by “value campaigns and strong execution of trade plans.”
It revealed it has made “good progress” at addressing loss (such as theft), which is expected to continue in the fourth quarter. The impact on the loss rate is “in line with expectations”.
In liquor, discretionary spending is expected to remain “subdued”. In the early part of the fourth quarter, sales performance has been “broadly in line” with the third quarter.
This was a solid update by Coles and shows its sales are performing well, even though inflation is reducing. If I were focused on ASX dividend shares, Coles would be one of the large businesses I’d choose to own.
