Coles CEO Leah Weckert has confirmed a decrease in requests from food and grocery suppliers for price hikes to counter the impact of high inflation. This suggests that Coles may soon lower its prices, responding to both consumer demands and political scrutiny regarding its market dominance.
Recent reports revealed that Coles had urged some suppliers to reduce their prices, aiming to pass on savings to consumers through discounts. Weckert stated that the number of requests for price increases from suppliers has significantly reduced, reflecting the company’s commitment to affordability.
In the first half of fiscal 2024, Coles experienced a 3% increase in revenue, reaching $22.27 billion, while net profit declined by 8.4% to $589 million. Despite this, efforts are underway to keep grocery prices reasonable, focusing on lowering costs wherever possible.
The supermarket chain has begun contacting suppliers to negotiate price reductions, aligning with recent declines in input costs such as shipping and raw materials. Some suppliers have been asked to prepare for reductions of up to 14%, particularly in non-food products.
Coles’ latest results indicate a slowdown in supermarket price growth, with food and grocery inflation moderating to 3% from 3.1%. Notably, the fresh category experienced deflation, including fresh produce, meat, deli items, seafood, and bakery products.
Weckert defended Coles and the supermarket sector against allegations of price gouging, highlighting the fierce competition among major chains. She emphasised the company’s contribution to the economy through investments, supplier payments, taxes, and shareholder returns.
Sales at Coles supermarkets rose by 4.9% to $19.78 billion in the first half, with earnings increasing by 3.2% to $1.73 billion. Additionally, the liquor arm saw sales rise by 1.8% to $1.99 billion, with earnings up by 5% to $148 million.
Despite a decrease in net profit, Coles’ performance surpassed market expectations, leading to an 8% increase in its share price. Analysts praised Coles’ efforts in controlling theft, maintaining sales momentum, and managing costs effectively.
Looking ahead, Coles reported a 4.9% growth in supermarket sales revenue in the first eight weeks of the third quarter, driven by volume growth and improved availability. However, liquor sales revenue declined by 2.2% due to reduced customer discretionary spending.
Suppliers have been approached about a new round of price cuts as part of upcoming promotional campaigns, aiming to reduce prices across various categories. Coles and other supermarket giants face ongoing political scrutiny and inquiries regarding pricing practices and profitability.
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