COLES GAINS MARKET SHARE DESPITE COMPETITION

ARTHUR HAGOPIAN

SYDNEY, Australia (FNS) -- Coles supermarkets achieved the strongest sales growth in the company's food and liquor division during the year, reflecting an increase in market share over the year of slightly under 1%, Coles Myer here reported earlier this month.

Despite increasing price competition, supermarket retail margins remained stable over 2000, due to continued focus on operating efficiencies, reduced wastage and inventory levels, and improving labor productivity, the company said.

Total sales for the food and liquor division showed a 9% improvement to $7.6 billion.

During the year, the chain opened 15 new stores and refurbished 29. The rollout of innovative new concepts included expansion of Coles' private label, piloting of bill pay facilities complementing existing in-store banking and ATM machines, and the launch of Coles Baby Club, the company said.

The expansion of the discount outlet Bi-Lo also continued, with sales exceeding $1 billion for the first time. The business opened 10 new stores and completed 23 refurbishments. Bi-Lo continues to extend its fresh-food offerings, with 95% of stores now featuring fresh-food departments.

Category management is also improving the value, breadth and quality of the customer offer, Coles said.

The liquor outlet, Liquorland, achieved double-digit retail earnings growth, despite a softening of sales in the second half of the year, with the four key retail brands, Liquorland, Vintage Cellars, Quaffers and Liquorland Direct, performing well. An improvement in retail margin was underpinned by cost initiatives.

Red Rooster recorded solid sales and earnings growth in its highly competitive market, with the opening of 13 new stores and the completion of 25 refurbishments, Coles reported.

Dennis Eck, Coles chief executive officer, said results were in line with market and budget expectations.

The company has also announced plans for "certain capital management initiatives to take advantage of the company's strong cash flows and franking credits, as well as a potential preference share issue," Eck said.

He said the company intended to maintain its shareholder discount program. A review is in place to ensure its long-term sustainability and to safeguard the program for existing shareholders.

"A central piece of the company's strategy is to constantly strengthen its price competitiveness through ongoing cost reduction programs. Accordingly, overall retail margins were maintained and in some cases increased while the overall gross profit percentage was in fact reduced. This remains our focus for next year," Eck said.