(Reuters) – Australia’s second-largest grocer Coles said annual profit from continuing operations fell slightly, missing analyst forecasts, as rising lease costs and store theft wiped out the benefit of charging higher prices, sending its shares tumbling.
The result marks a bumpy start for new CEO Leah Weckert, and spells the end of a period where Australia’s supermarket duopoly of Coles and Woolworths seized on a high-inflation environment, raising prices in order to protect profit margins.
Though sales for Coles continuing operations surged 5.9% in the year to June, a 9.4% blowout in lease renewal costs plus a one-fifth jump in stock loss – which it blamed on “increased levels of organized crime” – dragged same-store net profit down 0.3%.
Profit including discontinued operations including a service station retail unit which it sold in 2022 rose 4.8% to A$1.10 billion ($705.54 million), below Refinitiv’s estimate of A$1.11 billion.
Coles didn’t give profit guidance for the current financial year except that supermarket volumes were “modestly positive”. The company’s thinning margins and lack of guidance were “a little disappointing”, Macquarie Group (OTC:MQBKY) analysts said in a client note.
Shares of Coles were down 6% by midafternoon, their biggest intraday decline since early 2020, against a flat overall market, as analysts lowered their forecasts for the company. Shares of Woolworths, which reports annual results on Wednesday, were down 3%.
Coles announced a final dividend of A$0.30 per share, the same as last year.
($1 = 1.5591 Australian dollars)
