The penultimate chapter in the sad recent history of Coles was played out this morning. Coles announced their last financial results as an independent retailer.
A quiet little affair was arranged for the event. CEO John Fletcher, COO Mick McMahon and Chair Rick Allert delivered their final results to a phone hook up and Internet broadcast, electing not to eyeball pesky investors.
The reporting periods of Coles and Woolworths are out of sync by a month, so the earlier release of their rival’s numbers was a pointer to what might be coming from Fort Fumble.
When Woolworths announced a 27% rise in profit to $1.29bn off like for like sales growth of 6.6% it had to come from somewhere, and that somewhere was Coles. Analyst consensus was for a post tax profit of $774m, Coles guidance was $787m. The result, described by Fletcher as disappointing, is an underlying net profit of $792m.
Target, Officeworks, Kmart and Coles Express all generated profit growth. Food and Liquor earnings are down 9.5% and that business, the core of the company, is at best, stalled.
In what a company with sad recent performances, the distraction of recent events has impacted further. Morale is shot. Decision making has ground to a halt and the attention of key people has been diverted to the sale process. Plans are on ice. Woolworths have been able to tighten the screws.
Like Woolworths, other retailers including Just Group, JB Hi-Fi and Harvey Norman have enjoyed strong second halves, so few excuses are available. Fletcher and the board can find the reasons for the results in any mirror.
Coles is now in the interregnum with the establishment of a joint committee with suitor Wesfarmers. Other than the unlikely scenario of another buyer appearing over the horizon, Coles will become part of Wesfamers.
These results define the magnitude of the task ahead of the new leaders. As Mick McMahon pointed out in answer to a question, the job is about getting the retail basics right.
I didn’t hear anything this morning about workplace culture, which is the essential foundation on which any changes need to be based. Fletcher mentioned the difficulty the company has experienced in attracting good people. Ignoring the abominable culture as the reason, he cited doubts about ownership.
The final chapter in this tragedy will be the completion of the sale as Fletcher contemplates life with a reported $50m payout, having taken Coles form deep trouble to whatever we can call it today, and Chairman Allert is off to head Tourism Australia.
Disclosures: My company Orex has recruited managers for Bunnings, Myer and recently for a Coles company. My wife owns Coles shares.
Rob Lake publishes Brandish – a newsletter about retail intelligence.
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