Fill your trolley
1H23 RESULT
Need To Know
- 1H23 EBIT $1,114m, beats consensus at $1,023m
- Strong supermarket performance, sales +7.4% 2Q23 (+2.1% 1Q23)
- CEO Steven Cain handing the checkout over to COO Leah Weckert from 1 May
- Interim dividend 36cps, payment 30 March
The 12-month inflation tailwind showed up in this interim result together with a good supermarket performance and some momentum into 2H23. The big Ocado and Witron supply chain projects will be completed under a new CEO.
Supermarkets. 1H23 total sales accelerated through the half year up 4.6% with comparable sales growth up 4.9% (1Q +2.1%, 2Q +7.4%). Volumes lifted slightly but were challenged by flooding and cool weather impacting growing conditions for fresh food. EBIT margin increased 28bp to 5.3% on lower COVID-related costs.
Liquor. Sales down -2.4% and EBIT down -19.2% in 1H23 as COVID-19 on-premise restrictions in the previous year cycled through. Higher wages contributed to an increase in cost of doing business to 18.5%.
The Express fuel and convenience business was sold during the period.
Including the major automation projects, FY23 capex is still expected to be between $1.2-1.4bn. This will push up annual depreciation and amortisation charges in the income statement towards $1.55bn in FY23 for the continuing operations.
Investment View
Sales momentum is delivering very good numbers for supermarkets, plumped up by inflation but also as consumers normalise behaviour after a few years of disruption.
Comparable store sales growth will remain elevated in 2H23 but as inflation reaches a peak, it will begin to fade. COL is not sure when this change will happen.
The extended run of higher gross margin and momentum in supermarket sales is really helping COL’s earnings. We think the market will be upgrading forecasts from this result and hence we retain our Buy recommendation.
The departure of Steven Cain before the major capex projects are completed looks odd, but Leah Weckert is a company and industry veteran. The management change will not affect the project outcomes and as usual with a new boss, there may be some fresh vigour entering the C-suite.
Figure 1: 1H23 RESULT
Stock Overview
Share Price
Company Overview
Coles operates Australia’s second largest supermarket and liquor retailing group.
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