Coles boss Steven Cain says household budgets will be under increasing pressure as fuel prices start to edge up, but believes food will be one of the last areas where people will cut back their spending on.
The supermarket giant acknowledged on Wednesday that cost of living hikes have featured prominently in the lives of its customers over the past financial year, as inflation and higher interest rates weighed down household budgets.
The future price of fuel remains an unknown for shoppers, with the temporary discount to the fuel excise set to end next month. While Prime Minister Anthony Albanese told 2GB radio on Wednesday the government is examining the policy, its expiration could lead to higher petrol prices.
Cain said while an increase in fuel costs would be felt by consumers, spending on food was “probably near the end of things that people cut back on”.
“I expect there will be items before food that get impacted if fuel prices increase,” he said.
The supermarket giant on Wednesday revealed that it has had to contend with severe inflationary pressure over the past year, with higher wages, supply chain costs and rents all taking a toll on its numbers.
While Coles boosted its profit by 4.3 per cent for fiscal 2022 to $1.05 billion, with revenue up 2 per cent to $39.6 billion, COVID-19-related costs also led to a $240 million hit to the company’s bottom line.
Food producers have been feeling the impact of rising costs, with Cain confirming external suppliers have been approaching the company to request price increases for products. The business was also working with big brands to lock in reasonable long-term pricing where possible, he said.
“There are some suppliers coming back [with price requests] for a second or third time depending on their circumstances,” he said. Inflation across the supermarket came in at 1.7 per cent for the financial year, but was up 3.8 per cent in the June quarter.
The cost of living crunch has led Coles to sharpen its focus on the pricing of pantry staples and its own brand products. The business has locked the price of 1,168 products across its store until the end of January next year, and has started a round of price reductions that will come to include more than 500 items.
The supermarket also flagged on Wednesday that prices for some products should come down as the supply of fresh produce recovers.
Iceberg lettuces, which have been as expensive as $6.50 this year, were $3 a head this week across its stores.
Capsicums have been as expensive as $15 per kilogram, but are expected to moderate to $10 per kilogram in coming weeks as supply improves, a Coles spokesperson told this masthead.
Strawberry prices will fall to under $3 this week, while the price of beef is also expected to ease.
“The outlook is for beef livestock pricing to moderate and this is expected to be reflected in retail pricing,” the spokesperson said.
The supermarket giant upped its final dividend to 30 cents, bringing the final full-year payout up 3.3 per cent to 63 cents.
Coles’ shares slipped on the back of the results, sliding more than 5 per cent in the session. They closed at $17.84.
Jarden analysts said the result was solid, but noted that no trading update was given for the 2023 financial year so far.
Extracted from The Sydney Morning Herald
