Little Shop gave a little lift in sales
The mini collectables proved to be a hit with customers, as Citi reported a “remarkable turnaround” for Coles in the first quarter off the back of the promotion.
Analysts revealed that sales at the popular grocery grew by five per cent during the campaign, outperforming Woolworth’s for the first time in two years.
“Coles Little Shop Campaign exceeded even our optimistic expectations,” Citi said.
“This has come at the expense of Woolworths, where like-for-like sales growth is likely to moderate to 1.5 per cent.”
Coles’ offering of free plastic bags in the lead up to a total bag ban also helped entice customers to their store.
Citi estimates that the supermarket enjoyed an extra $200 million in sales growth and net earnings – before interest and tax – of $10.8 million.
“Little Shop was clearly a success in terms of driving sales momentum, however this came at a cost, limiting the operating leverage, compared to if this sales momentum was generated organically.”
Citi is not convinced that the supermarket giant will be able maintain it’s winning streak into the coming quarters.
“Continued investment is necessary in order to continue momentum over the coming quarters. We see significant risks ahead that Coles will not be able maintain its lead over Woolworths given senior management changes and lagging execution levels.”
This story originally appeared on sister-site Inside FMCG.
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