© Reuters. FILE PHOTO: The Coles (principal Wesfarmers model) emblem is seen on a facade of a Coles grocery store in Sydney, Australia, February 20, 2018. Image taken February 20, 2018. REUTERS/Daniel Munoz/File Picture
By Byron Kaye and Echha Jain
SYDNEY (Reuters) – Australia’s No. 2 grocery store operator Coles Group (OTC:) on Tuesday rejected accusations of worth gouging as its first-half revenue beat analyst forecasts, saying meals inflation was a worldwide downside and its margins have been regular.
Coles and bigger rival Woolworths Group, which collectively account for two-thirds of Australian grocery gross sales, have been accused by lawmakers of utilizing their market dominance to place up shelf costs greater than wanted at a time when 13 rate of interest hikes have left extra folks struggling to pay their mortgages.
The businesses now face Senate and competitors regulator inquiries into how they set costs, with some politicians calling for extra aggressive anti-cartel regulation and even for them to be damaged up.
Coles posted an underlying revenue of A$589 million ($385 million) for the six months to Dec. 31, down 8.4% on the identical interval a yr earlier however 5% above the typical analyst forecast.
Coles CEO Leah Weckert mentioned the corporate’s earnings margins had remained flat for years and it wanted revenue to pay workers, suppliers and shareholders.
For at the least 5 years the corporate had made lower than 3 cents of revenue for each greenback spent by consumers, and “it has not gone up as now we have seen inflation come by way of”, she advised reporters.
“Meals inflation has been confronted all over the place on the earth,” Weckert mentioned. “It’s a international subject. It isn’t distinctive to Australia.”
The Melbourne-based firm mentioned the pre-tax earnings margin of its grocery store division shrunk to five.1% within the half, from 5.3% a yr earlier. Grocery store worth inflation slowed to three%, from 7.4% a yr earlier, it added.
Grocery store gross sales rose 4.9% to A$19.8 billion, forward of analyst forecasts collated by market aggregator Seen Alpha, and the corporate mentioned that progress charge had continued within the first eight weeks of 2024.
Coles shares have been buying and selling 6.8% greater by midsession, towards a 0.2% decline on the broader market, their largest intraday acquire in since March 2020, as analysts started upgrading full-year revenue forecasts.
“A greater than anticipated consequence and bettering gross sales momentum … is anticipated to help additional share worth beneficial properties,” mentioned E&P Capital analyst Phillip Kimber.
Woolworths final week posted worse-than-expected first-half outcomes and mentioned its CEO Brad Banducci would retire after greater than eight years on the helm.
($1 = 1.5307 Australian {dollars})