3rd Quarter Results
07 Mayo 2002 - 2:00AM
UK Regulatory
RNS Number:5363V
Coles Myer Ld
7 May 2002
Coles Myer Ltd.
ABN 11 004 089 936
800 Toorak Road, Tooronga, 3146
Telephone (03) 9829 3111
Facsimile (03) 9829 6787
Postal Address: PO Box 2000, Glen Iris, 3146
News Release
--------------------------------------------------------------------------------
Monday, 6 May 2002
Coles Myer sales and earnings update
• Q3 2002 sales up 9%
• FY2002 transitional year
• Revised FY2002 earnings forecast
• Commitment to long term strategy
Overview
Coles Myer today announced a revised profit after tax forecast for FY2002 of
$350 - $365 million.
CEO John Fletcher said that, having reviewed April earnings and their
implications for the full year, the company had brought forward its third
quarter sales announcement.
Mr Fletcher said CML remained committed to its five-year strategy and previously
announced long-term targets.
"When we began this journey, we set ourselves some ambitious goals and we remain
absolutely committed to achieving them.
"Of course we are disappointed that we will not hit our short-term target.
"But the turnaround has begun in all areas of our business. Much has been
achieved. Many initiatives are underway. The full benefits of these are taking a
little longer than planned to hit our bottom line."
Mr Fletcher said that as previously stated, FY2002 was a transitional year,
which would incur significant one-off executive change and project costs, most
of which would be reported below the retail EBIT line.
To provide clarity on the underlying performance of the brands, retail EBIT
growth of approximately 10% was expected this year.
"While the GM&A turnaround has commenced, earnings in the short-term at Kmart
and Myer Grace Bros are being impacted by margin pressure.
"This is the result of higher promotional activity to maintain sales momentum,
clearing winter stocks in season and responding to an increasingly competitive
market," Mr Fletcher said.
Coles Myer announced sales of $19,237 million for the first three quarters ended
28 April, 2002. This includes sales for the 13 week third quarter of $6,111
million, a rise of 9%.
The Food and Liquor division delivered a 10.2% increase in third quarter sales
while General Merchandise and Apparel sales rose by 6.1%.
CML's comparable store sales rose by 4.5% over the first three quarters,
including third quarter growth of 4.1%.
General Merchandise and Apparel
Warren Flick, Chief Operating Officer - General Merchandise and Apparel - said
early progress was being made in repositioning Target, Myer Grace Bros and
Kmart.
"We are seeing signs of recovery across the three brands. Each brand faces a
different challenge and is at a different stage of rebuilding - the recovery is
being led by Target, and will follow in Myer Grace Bros and Kmart.
"While sales performance in Kmart and Myer Grace Bros was satisfactory, margin
contributions were lower than planned and were not adequately offset by cost
savings.
"Across the division we continue to strategically reinvest in price, new ranges
and service levels to improve competitiveness. Under Operation Right Now, good
progress has been made in cost reductions across all businesses.
"GM&A inventory remains within desired levels and well below last year," he
said.
Kmart and Officeworks' combined sales grew by 7.1% over the quarter.
"While Kmart's Q3 sales were solid, they were below plan.
"We found that despite our guaranteed low price policy, customers are still
expecting our traditional weekly and seasonal promotional events.
"In the third quarter, efforts to adjust the promotional activity resulted in a
lower rate of sales growth. Compounding this, sales of apparel were particularly
disappointing.
"In the fourth quarter we expect to more fully protect our promotional base,
while continuing to grow our every day sales momentum.
"Performance will improve as Kmart Managing Director Hani Zayadi builds his new
team, with the skills and experience in merchandising and marketing to execute
the strategy in a challenging environment.
"Excellent progress has already been made on significantly reducing the cost of
doing business in the brand," Mr Flick said.
Officeworks' performance continues to be solid.
At Myer Grace Bros, sales including Megamart increased by 6.5% in the third
quarter.
"Our reinvestment in service standards and store presentation is being well
received by customers.
"We have recorded much improved sales in cosmetics, accessories, electrical,
furniture and bedding categories," Mr Flick said.
"However, while some progress has been made in our repositioning of apparel
merchandise, early winter sales were not as high as originally planned. This
required a more aggressive promotional program to sustain sales momentum and to
clear winter merchandise in season. We expect this promotional emphasis to
continue into the fourth quarter.
"We are confident that changes made in the merchandising team in late 2001,
combined with ongoing improvements to service, store presentation and marketing,
will result in stronger apparel performance in the approaching spring/summer
season.
"Inventory levels continue to be well below a year ago and we expect similarly
low levels at year end.
"The recent appointment of Dawn Robertson as Managing Director, is expected to
accelerate the pace and scope of our Myer Grace rebuild."
Target's sales growth was 4% for the quarter as its strong recovery continued in
line with strategy.
"This result was particularly encouraging as sales growth was achieved on a high
prior year base, which was inflated by heavy promotional activity.
"Target has been able to progressively implement its turnaround plan as Managing
Director Larry Davis and his rebuilt merchandising team are now in place.
"They are delivering on their customer offer of on-trend, high quality
merchandise at very affordable prices.
"Target is also making significant progress in reducing its cost of doing
business.
"Additionally, we believe Target's result has been delivered without any
detrimental impact on our other brands."
Food and Liquor
Alan Williams, Chief Operating Officer - Food, Liquor and Logistics - said Coles
Myer's supermarkets and liquor stores delivered a solid result.
"The 37 ex-Franklins stores are now all in operation and are continuing to build
sales," Mr Williams said.
"As previously stated, the market in both food and liquor remains very
competitive, with increasing promotional activity, particularly in Queensland.
"Our store expansion program continued during the quarter, with 11 supermarkets
and 5 Liquorland stores opening and 20 refurbishments completed.
"Importantly, we can confirm that 30 supermarket sites have already been secured
for opening in FY2003, in line with our strategic plan," Mr Williams said.
e.colesmyer
Excluding Myer Direct, sold in the first half, sales rose by a strong 38%, led
by Harris Technology and Coles Online.
For further information:
Media Scott Whiffin 03 9829 5548
Analysts Amanda Fischer 03 9829 4521
Financial analysis
Third Quarter Year to date
Business Groups 2001 2002 Chg 2001 2002 Chg
(Ex Katies, Red Rooster, $m $m % $m $m %
Myer Direct)
Food & Liquor 3,610 3,979 10.2 10,698 11,859 10.9
GM&A 1,944 2,063 6.1 6,844 7,201 5.2
Myer Grace Bros & Megamart 647 689 6.5 2,325 2,453 5.5
Target 499 519 4.0 1,781 1,824 2.4
Kmart & Officeworks 798 855 7.1 2,738 2,924 6.8
e.colesmyer 50 69 38.0 143 177 23.8
Total Sales 5,604 6,111 9.0 17,685 19,237 8.8
Comparable Store Sales 4.1 4.5
This information is provided by RNS
The company news service from the London Stock Exchange
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