Coles FY24 Earnings Call Highlights

Coles (ASX: COL) shares are on track to close at levels not seen since August 2022 after its FY24 result beat market earnings and margin expectations.

FY24 Earnings Summary

Coles reported earnings for the 53 weeks to June 30. The below percentages have been normalised and remove the impact of the 53rd week in FY24.

• Group revenue up 3.2% to $43.5bn

• Group EBITDA up 0.2% to $3.64bn

• Group EBIT down 1% to $2.04bn

• Underlying NPAT up 4.1% to $1.21bn

• Total dividend of 68 cents per share

Citi analysts (as of 25-Jul) expected FY24 revenue of $43.4 billion, underlying NPAT of $1.08 billion and a total dividend of 69.5 cents per share.

Earnings Call Highlights

The below topics have been answered by CEO Leah Weckert and CFO Charlie Elias.

Cost savings: "We have managed our cost base with Simplify and Save to invest benefits of $238 million in addition to tackling loss and driving improvements in availability."

Marketing activities: "Our value proposition led by our Great Value, Hands Down Seasonal Value campaigns and own brands as well as our loyalty offers, has resonated with our customers."

eCommerce sales: "E-commerce sales increased by 30.1% with penetration at 9.4%."

Food margins: "Underlying EBIT increased by 10.5% with underlying gross margin increasing by 50 basis points supported by lower tobacco sales, growth in 360, OL360 range of promotional optimization, and simplifying safety invest benefits."

Capex outlook: "Capital expenditure on an operating and accrued basis was $1.4 billion, an increase of $43 million compared to prior year. Capital expenditure falls into four key areas: store renewals, growth initiatives, efficiency initiatives, and maintenance."

FY24 acquisitions: "During the year, we made strategic investments with the acquisition of two automated milk processing facilities and 20 liquor retail stores in Tasmania, which are now all trading as Liquorland."

Analyst Q&A Highlights

On CFCs (Customer Fulfillment Centre) openings: "We've had an absolute laser focus on executing against that plan. And we have looked for every opportunity ... to find opportunities to speed up the timeframe because we knew that would reduce our implementation costs."

Ocado benefits: "We won't get into the specifics, but I think we all know what are the key benefits for the customer: extended range, freshness, availability, and some other benefits."

Ocado store economics: "We are really looking to optimize the whole of the network ecosystem, which is both through the way we do our cost management, but also the way that we're releasing capacity to grow into more sales.

Theft reduction initiatives: "We've got Skip Scan, Smart Gates, and Bottom of Trolley now rolled out really on mass. And that makes a material difference."

On stock loss: "We're exiting FY25 at a better rate than we exited FY24.

Gross margin sustainability: "You should expect to continue to see gains from that as we move forward."

On inflation: "We are moving towards and converging on what I would describe as a more normalized inflation position."

Liquid business outlook: "The second half of 2024 was a challenging outcome, but there are certainly reasons to be more positive as we look towards 2025."

This article was generated with the support of AI and reviewed by an editor.