The Coles Group Ltd (ASX: COL) share price is back on form on Thursday.
In morning trade, the supermarket giant's shares are up 1% to $17.90.
Why is the Coles share price rising?
The driver of today's gains has been the release of a first quarter update before the market open.
According to the release, Coles delivered a 2.9% increase in total sales to $10,548 million for the three months ended 29 September.
The key driver of this growth was its Supermarkets business, which reported a 3.5% lift in sales revenue to $9.5 billion for the first quarter. Excluding tobacco, sales revenue increased by 4.9% over the prior corresponding period. Comparable sales growth was 2.4% for the period.
Management notes that its sales growth was supported by its Winter and Spring value campaigns, promotional activity, the Winter of Sports giveaway campaign, and strong eCommerce growth. This was partially offset by availability challenges in eggs due to the impacts of Avian influenza.
It also highlights that Exclusive to Coles sales revenue increased by 4.5% to $3.3 billion with solid volume growth. This was particularly the case in the Food category. Management notes that with value remaining front of mind for consumers, it made a number of significant investments in value across the portfolio. This includes in cheese and everyday staples.
Acting as a drag on its performance was the Liquor segment. It recorded flat sales revenue and a 4.4% comparable sales decline compared to a year ago. Management notes that headline sales benefitted from higher space growth following the acquisition of 20 stores in Tasmania and the effect of event timing. This includes the AFL Grand Final occurring in the first quarter this year.
Speaking about the quarter, Coles Group's CEO, Leah Weckert, said:
Cost of living remains a challenge for many of our customers, and we are focused on helping them find value in our stores through weekly specials, value campaigns, Flybuys and exclusive brands. Pleasingly for customers, meat, dairy, health & beauty and homecare categories were all in deflation during the quarter. Overall supermarkets inflation, excluding tobacco, declined to 1%, remaining well below historic levels.
In preparation for the upcoming festive season we have launched many new products to make entertaining at home more delicious, easy and affordable. In-store execution, availability and quality continue to be priorities to improve customer experience.
$880 million supply chain investment
In other news, Coles has announced that it is investing $880 million to develop a new ambient Automated Distribution Centre (ADC) in Truganina, Victoria in partnership with WITRON Australia.
It notes that WITRON continues to be the world leader in supermarket supply chain automation with 98 projects across 13 countries.
The Victorian facility will have approximately 15% more capacity than Coles' New South Wales and Queensland ADCs with the ability to process 4.6 million cartons per week.
Commenting on this significant investment, Weckert said:
This is another important step in Coles' business transformation as we continue to invest in technology to enhance product availability for our customers and improve efficiency across our supply chain. This new automated distribution centre in Victoria will complement our existing sites in Queensland and New South Wales, enabling us to drive productivity and further capitalise on the advantages of worldleading automation technology.
Outlook
Early in the second quarter, Supermarkets sales revenue growth has remained broadly in line with the first quarter. Management notes that volume growth has been supported by the investments it continues to make in value across the portfolio to help support families in the lead up to Christmas.
In Liquor, sales revenue growth remains subdued with the business focused on providing a compelling value proposition for the festive season.
