Coles Liquor has announced sales revenue for the third quarter of $735 million, up 4.3% on the prior corresponding period.
Comparable sales growth was impacted by New Year’s Eve, typically a strong trading day in the liquor calendar, which fell in the third quarter of this financial year compared to the second quarter last year.
Comparable sales growth was 3.5% for the quarter and 0.9% on a NYE adjusted basis. According to Coles, sales performance was driven by both improvements in average basket size and transaction numbers, with the Spirits category the strongest performer in the quarter.
Coles Group CEO Steven Cain said: “We delivered a solid outcome for the third quarter. We know that customer expectations are changing faster than ever, and we are resolutely focused on delivering our Fresh Tomorrow strategy. We were also pleased to provide support for communities impacted by natural disasters such as floods in Far North Queensland, bushfires in Tasmania and Victoria, and Cyclone Veronica in WA.”
However, he said the food and liquor retailer faces challenges, including costs rising faster than sales and margin dilution from the shift to online shopping.
Coles Online experienced growth of 27%, with sales of over $1 billion on a rolling 12-month basis.
Liquor Market a stand-out
Coles reported that its growing Liquor Market network was a stand-out performer.
Liquor Market made its debut in Melbourne’s Ringwood in 2016 on the site of a former First Choice store.
At the time, The Australian Financial Review described the store as “more akin to a Kmart or Bunnings than Coles’ more upmarket Vintage Cellars or Woolworths’ Dan Murphy’s” since it offers a simplified range of wine, beer and spirits, which is displayed in shelf-ready packaging or stacked on pallets, with a promise to beat cheaper advertised prices”.
Four additional First Choice Liquor Market brand conversions were completed during the quarter, bringing the total number of conversions to 19. An additional 10 conversions are scheduled to be rolled out in the fourth quarter.
The retailer said: “Converted store sales grew by almost double the rate of unconverted stores, with customers responding positively to the renewed format and range on offer.”
However, trading conditions for Liquorland were impacted by a subdued market and lower promotional intensity in beer, particularly in January. Exclusive Liquor Brand (ELB) growth continued to be strong in the wine category, lifting ELB penetration and Liquorland’s market share in the wine category.
It added: “Trading conditions for Vintage Cellars remained challenging during the period, largely driven by softer growth in the wine category and two store closures.”
Joint venture with Australian Venue Co closes today
Coles also announced that completion of the deal it inked with Australian Venue Co in March to manage the Spirit Hotels group is expected to occur today.
AVC currently owns about 60 pubs, clubs, bars and restaurants around Australia and will add Coles’ 87 Spirit Hotels venues in Queensland, including around 3000 poker machines, to its portfolio.
The new business is called Queensland Venue Co, with Coles and AVC owning an equal number of shares.
Under the deal, Coles will manage the day-to-day operations of the 243 retail liquor stores in Queensland and 10 retail liquor stores attached to Spirit Hotels in Western Australia and South Australia.
Coles will take the profits from the bottle shops and receive about $200 million cash as part of the deal, while AVC will take the profits from the hotels and gaming operations.