All eyes will be on the Coles Group Ltd (ASX: COL) share price this morning following the release of the supermarket giant's first full year result since its demerger from Wesfarmers Ltd (ASX: WES).
According to CommSec, the market is looking for a full year net profit after tax of $1,080 million and a final dividend of 32.9 cents per share.
How did Coles perform in FY 2019?
For the 12 months ended June 30, Coles reported full year group sales revenue growth (excluding Fuel and Hotels) of 3.1% to $35 billion. This was driven by sales revenue growth across Supermarkets, Liquor and Express.
The exclusion of Fuel sales is due to its New Alliance Agreement with Viva Energy REIT Ltd (ASX: VVR), which means that the Express business no longer records fuel sales as sales revenue. Commissions earned by the Express business will now be recorded as other operating revenue, which leaves Express sales revenue as being convenience sales only.
Group EBIT (excluding Hotels and significant items) declined by 8.1% to $1.3 billion. This was driven by lower Express fuel volumes, corporate costs associated with being a standalone ASX company, and one-off demerger costs. One big positive was that its Supermarkets EBIT returned to full year growth for the first time since FY 2016 through higher sales and an improved gross margin.
Profit from ordinary activities after tax was up 5.4% to $1,078.2 million, which is just about in line with the market's expectations.
This allowed the Coles board to declare a final fully franked 35.5 cents per share dividend. This comprises a final dividend of 24 cents per share and a special dividend of 11.5 cents per share to cover the period from November 28 2018 (the effective date of the demerger from Wesfarmers) to June 30 2019.
CEO Steven Cain was pleased with the company's performance in the face of a rapidly changing retail landscape.
He said: "It has been a year of substantial change for Coles following the successful demerger and ASX listing from Wesfarmers in November 2018. As highlighted at our Investor Day in June, consumer behaviours are changing faster than ever, we are heading into the most competitive period in Coles' history, and there are significant industry wide cost headwinds. With the return to profit growth in our core Supermarkets division we have made a solid start to our four year transformation program. Delivery of our sales growth strategy and the $1 billion Smarter Selling program will be critical to Group EBIT growth."
Outlook.
During the first quarter of FY 2020 the Little Shop promotion has again resonated with customers and has driven strong engagement. However, it warned that cycling the strong comparable sales growth from last year's highly successful Little Shop campaign will be challenging given activity in the market from the likes of Woolworths Group Ltd (ASX: WOW).
No earnings guidance was provided with the release. Though, management once again reiterated that Smarter Selling initiatives in FY 2020 are anticipated to deliver annualised benefits in excess of $150 million.
