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sales report out

  1. gaweb

    2,154 Posts.


    HOMEX - Melbourne


    * Group sales up 5.5%1
    * Full year profit guidance unchanged
    * Food & Liquor sales up 5.3%
    * Target and Kmart turnaround accelerating
    * Myer Grace Bros rebuild on track
    * Strong H1 earnings improvement
    - Double digit Food & Liquor earnings growth
    - EBIT margins up across Kmart/Officeworks, Target and MGB

    Coles Myer Ltd (CML) today announced half year sales of $13.8
    billion, an increase of 5.5% for the 26 weeks ended 26 January, 2003.
    Second quarter sales rose by 4.1% to $7.5 billion.

    CML Chief Executive Officer, John Fletcher, said the Food & Liquor
    division had delivered a sales increase of 5.3% over the half in an
    intensely competitive environment.

    Kmart and Officeworks combined sales rose by 9.5% over the half and
    Target sales increased 8.6%.

    "The turnaround at Kmart and Target has accelerated. The distinct
    strategic positionings of these brands are beginning to deliver
    sustainable results," Mr Fletcher said.

    "Considering the state of these businesses only 18 months ago, this
    is a fantastic outcome. "EBIT margins expanded across the Food &
    Liquor Group, Kmart/Officeworks, Target and MGB over the half year,
    despite a very competitive market.

    "We reaffirm the earnings guidance given at the 2002 Annual General

    "The impact of the reduction in shareholder discount rates remains
    within expectations.

    "For our Food & Liquor business, all of our analysis confirms the key
    point of difference with our major competitor is a petrol offer. The
    effect of intensified petrol discounting over the second quarter
    clearly impacted our sales.

    1 Excluding Red Rooster and Myer Direct.

    2 Net profit after tax of $425-435 million. Excluding (i) any one-off
    profit from the potential sale of Sydney Central, and (ii) any
    potential one-off non-cash charge from an anticipated change in US
    accounting standards which may affect inventory valuations.

    "Completion of a fuel offer is our highest priority. While we had
    hoped for an announcement in December, this is a significant
    initiative and our objective must be to ensure that we secure the
    best long term outcome for customers and shareholders," Mr Fletcher


    * Sales growth of 5.3% for the half
    * Double-digit earnings growth, in line with strategy
    * Sales impacted by intensified fuel discounts

    Chief Operating Officer Food and Liquor, Alan Williams said sales had
    grown by 5.3% for the half year and 3.4% in the second quarter. The
    group was on track to deliver double-digit profit growth for the
    half, in line with strategy.

    "Despite our strong competitive and value position, food sales have
    been impacted by fuel discounts. In addition, price deflation has
    slowed sales in the liquor market, and lower inflation has impacted
    other areas, particularly fresh produce. However, our continuing
    focus on shrinkage, waste and other initiatives has underpinned and
    enabled strong growth in our bottom line," Mr Williams said.

    Mr Williams said that while completion of a fuel offer was the
    Company's highest priority, the Food & Liquor Group was also focussed
    on a number of initiatives designed to further improve the customer
    offer and back office efficiencies. These include:

    * Improved fresh produce offer with better quality, merchandising and
    service standards
    * Reinforcement of our competitive price position
    - Expanding value for money house-brand range to meet demand
    - Consistently strong promotional offers
    - Competitive every day shelf pricing
    * Raised customer service standards - check-out efficiencies and
    greater visibility of store management
    * Revised marketing, including advertising and in-store treatment to
    promote the complete customer offer
    * Reduced product cost - GNX electronic purchasing
    * Continuing operational efficiencies
    - Improved shrinkage trends
    - Reduced store administrative expenses
    - Reduced fit-out costs

    "The supermarket store expansion program is continuing, with 17 new
    stores opened during the half, in addition to 6 acquisitions. A
    further 21 openings are expected over the year.

    "Liquorland opened 32 new stores and two hotels in the half, with a
    further 27 to open in the second. The Theo's Liquor acquisition in
    NSW will contribute a further 47 stores and four hotels, expected in
    late March3.

    "In the second half of FY2003, we expect sales growth to benefit from
    further new store openings and contributions from Theo's Liquor," Mr
    Williams said. 3 Subject to ACCC approval.

    Kmart & Officeworks again performed strongly, with combined sales up
    9.5% over the half and 9.6% in the second quarter on last year's high
    sales base.

    "The Kmart result reflected growing customer acceptance of our
    strategic direction, underpinned by our lowest price guarantee,"
    Kmart MD Hani Zayadi said. "Customers are responding positively to
    our renewed focus on meeting their needs, which sees us delivering
    in-store range enhancements, improved service, wider aisles and
    faster checkouts. "Our more effective marketing campaign, 'cutting
    the cost of living', has achieved strong results. The focus on item
    and price is continuing and has been well received. "Sales in all
    apparel areas as well as entertainment and consumables were
    particularly strong, with better in stock performance and merchandise

    "Kmart has opened three new stores and three Garden Super Centres in
    the past six months, with a new Kmart store and Garden Super Centre
    scheduled to open in the next quarter," Mr Zayadi said.

    Officeworks delivered another strong performance. Officeworks MD
    Peter Scott said the store rollout strategy was proceeding to plan,
    with 3 new locations opened over the second quarter and a further 7
    openings expected in the second half. The Viking acquisition was
    settled on 3 January and is performing to plan.

    Myer Grace Bros and Megamart combined sales were slightly lower over
    the half (down 1.3%) and the second quarter (down 1.5%). This was in
    line with our expectations, given the temporary closure of the Bondi
    store and shareholder discount reduction. "In a very competitive and
    promotional market, our first Christmas under the turnaround strategy
    was satisfactory. Good customer traffic was experienced over the
    holiday period, with customers responding to our strengthening brand
    positioning and strategic marketing events," Myer Grace Bros MD Dawn
    Robertson said.

    "Further enhancements to branded product ranges in our key focus
    areas of womenswear, menswear, cosmetics and home will continue
    through 2003, along with ongoing improvements in service quality and
    in-store environments. Our new marketing program launches this
    weekend, and our new private label brands, 'Basque' and 'Urbane',
    have already been well received by customers.

    "Importantly, our bottom line is reflecting margin improvement, due
    to better planning and execution resulting in higher stock turn.

    "Megamart opened its Narre Warren store in Victoria during the second
    quarter to a very positive response from customers," Ms Robertson

    Target sales rose by 8.6% over the half and 6.3% in the second
    quarter, in line with strategy as its recovery continues to build
    real momentum. The result is particularly positive given the net
    reduction of two Target Country stores during the half.

    "Customers have responded very well to our exciting offer,
    particularly in apparel, manchester, and toys," Target MD Larry Davis

    "The success of the '100% Happy' marketing campaign has exceeded our
    expectations. The program reached full sw
    ing in the second quarter,
    with television, outdoor and magazine communications promoting our
    'great style, great value' offer.

    "Our focus continues to remain on delivering on-trend, high quality
    ranges and achieving rapid sell-through within each season.

    "The combination of merchandising improvements, higher stock turns
    and operational efficiencies have delivered fuller margins over the
    half," Mr Davis said.


    Sales in the Emerging Businesses division increased by 23.9%4 over
    the quarter, led by strong growth in Harris Technology. Following our
    agreement with Australia Post to provide pick, pack and delivery
    services, we have recently strengthened our marketing of Coles
    Online, and now also offer a wider range of credit card payment
    options for purchases.

    Further enquiries:

    Media Scott Whiffin 03 9829 5548
    Analysts Amanda Fischer 03 9829 4521

    (13 WEEKS) (26 WEEKS)
    2002 2003 CHG 2002 2003 CHG
    Business Group Sales $M $M % $M $M %
    (ex Red Rooster,
    Myer Direct)

    Food & Liquor 4,139 4,280 3.4 7,881 8,295 5.3
    Kmart & Officeworks 1,226 1,344 9.6 2,091 2,291 9.5
    Myer Grace Bros
    & Megamart 1,064 1,048 (1.5) 1,764 1,741 (1.3)
    Target 775 823 6.3 1,305 1,418 8.6
    Emerging Businesses 42 52 23.9 85 114 33.9
    Intra-group sales (3) (7) (7) (15)

    Total Sales 7,243 7,541 4.1 13,119 13,845 5.5

    Comparable Store Sales 1.8 2.9
    Exited businesses
    Red Rooster 59 - 114 -
    Myer Direct 26 - 39 -
    Total exited businesses 85 - 153 -

    4 Excluding Myer Direct (sold January 2002).

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