Coles CEO Leah Weckert talks profit margins, seasonal products in FY24 results

Thanks to its strong supermarket sales Coles has reported a $1.1 billion after-tax profit for FY24.

Its focus on creating affordable products with its Coles ‘simply’ range and premium products with its Coles ‘finest’ range, in combination with its thousands of weekly discounts, has brought in customers seeking choice and value.

“With ongoing cost-of-living pressures, we will continue responding to the needs of our customers with a focus on value through everyday low prices, weekly specials, Flybuys and Coles Own Brand,” said Leah Weckert, CEO and managing director of Coles Group.

Coles’ extensive national footprint, across 856 supermarkets, 992 liquor stores and numerous digital platforms, has positioned it as one of Australia’s biggest omnichannel retailers for essential household items.

But with the ongoing ACCC inquiry into price gouging and consumer frustration with the persistent cost-of-living crisis, Coles still has to answer for its profit margins.

Down down 

“I mentioned in my opening remarks that our net profit after tax for the year was 2.6 per cent – which [means that for] every $100 the customer spends with us, we make $2.60, or less than three cents on every dollar,” Weckert said on a media call on Tuesday

“That profit rate has remained constant now for the last couple of years, so there has not been an increase in our profit rate as we have moved through this inflationary period,” she added.

Citing internal research, Weckert said that two-thirds of Coles customers continue to worry about their ability to cover rising costs.

However, she was quick to point out that the inflationary costs that Australians are experiencing extend well beyond groceries and include insurance, education, fuel, rent, and mortgages.

“We are certainly pleased with the momentum that we have seen in the supermarket space [as] you would have seen in our outlook today, with sales for the last eight weeks at 3.8 per cent, which is a pleasing result from our perspective, with really good growth in volume,” said Weckert.

“That’s really being driven by a lot of Australians choosing to eat out less and eating at home more and they’re looking to replicate some of the experiences that they would have had when they were eating out by buying products that might be a little more premium or a little more special when they come in to shop with us,” she elaborated.

In the last year, Coles paid $34.7 billion to suppliers for their cost of goods, a $2.4 billion increase year on year.

Coles also paid over $6 billion in salaries and wages to its team, a 5.75 per cent increase year on year.

“We have had a very strong focus on cost management in our business so that we are able to continue to invest in prices for consumers and bring prices down,” stated Weckert.

According to Weckert, if Coles were to take all of its net profit and put it back into prices, prices would only reduce by roughly 3 per cent. 

Christmas spirit

The cost-of-living crisis and inflation pressure that many Australian consumers are experiencing before the holiday season are driving Coles’ product offering in the last quarter of the calendar year.

In line with the expansion and popularity of its home brand products, and its simply and finest ranges, Coles will be launching new products for Christmas that have never been seen before in the Australian market.

“I think if you play that forward to Christmas, what that is going to mean is that more Australians will be celebrating Christmas at home, and they will be looking to make that a special event,” concluded Weckert.

“As part of our Christmas range, which will launch in a couple of months’ time, we’ll be offering a broad range of price points so that you are able to put together a magnificent Christmas celebration regardless of what the budget is that you’re operating under.”

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