Coles is expected to have fallen further behind rival Woolworths when the supermarket’s parent Wesfarmers reports full-year results on Thursday.
Analysts predict Wesfarmers’ annual results will show Coles has lost more customers, with Citi tipping Coles’ like-for-like sales growth – a crucial revenue measure and indicator of market share – will have eased further in the fourth quarter.
Citi’s analysts have forecast Coles like-for-like sales to have eased from 0.8 per cent in the third quarter to 0.7 per cent in the fourth quarter, while Woolworths’ like-for-like sales are expected to rise 5.3 per cent in the fourth quarter, up from its 4.5 per cent growth in the third quarter.
Woolworths results are due on August 23.
“Supplier feedback consistently points to an acceleration in Woolworths’ supermarket sales momentum,” Citi said in a research note.
In recent months, Coles has cut the price of bread by as much as 35 per cent as it ramps up its investment in lowering prices.
It spent about $64 million on lowering prices during the first half, while Woolworths is ahead of the game, having spent more than $1 billion in 12 months on reducing prices.
Citi also expects Woolworths’ earnings to rise and for Coles’ earnings to contract due to its increased price investment and weaker sales growth.
However, strength from Wesfarmers’ Bunnings hardware business and resource division are expected to offset Coles’ earnings decline.
Recent research commissioned by Coles on cost of living trends in Australia shows consumers are paying higher prices for utilities, childcare, health and education, which in turn is contributing to cautious spending.
The report, which draws data between 2011 and 2015 from the Australian Bureau of Statistics, the National Centre for Social and Economic Modelling and consumer surveys, notes the cost increases had a greater impact on lower income families than wealthier households.
“At a time when incomes are not growing much, many households are having to confront large price rises in other areas of everyday living,” John Durkan, Coles managing director said in a speech at the American Chamber of Commerce in late July.
“We are seeing people really being affected by utility prices across the board.
“They are having to choose not only what they are going to feed their family but how much of it, which is disastrous as far as I am concerned.”
In June, Coles opened its 800th supermarket at Aurora Village shopping centre at Epping North. The new market-style supermarket features an in-store bakery with flatbread made daily, a continental delicatessen with a large selection of cheese and fresh seafood. It also features a self-service olive bar, ‘scoop and weigh’ station and an extensive fresh produce area with fruit and vegetables displayed on ice.
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