Technology adoption saves Coles more than AU$250m during FY20

But could not prevent a 9% drop in statutory net profit after tax to AU$978 million.

Supermarket giant Coles has touted that during the 2020 financial year it saved more than AU$250 million by adopting more technology to drive efficiencies as part of what it has dubbed its "smarter selling" strategy.

Under the strategy, the company said during the year it introduced data and technology-led solutions in-store, such as its deli easy order and bakery production tools; developed artificial intelligence tools for areas such as forecasting and markdowns; and transitioned more than 3,000 support team members Australia-wide to remote working.

Coles also entered into long-term leases to develop its Ocado online fulfilment sites in Sydney and Melbourne, where construction for its Melbourne site has commenced.

Despite the savings, the company's statutory net profit after tax was down by 9.3% from AU$1.08 billion to AU$978 million for the period ending 28 June 2020.

Group sales revenue was reduced by 2% to AU$37.4 billion on a statutory basis, but it grew on a retail basis by 6.9% to AU$37.4 billion during the full year. 

Of the latter figure, Coles supermarket reported AU$33 billion during FY20, following a 6.8% lift; its liquor business grew 8% to $3.3 billion; and its express convenience stores made AU$1.1 billion in revenue, up 5.6% from AU$1.05 billion last year.

Meanwhile, group statutory earnings before interest and tax (EBIT) came in at AU$1.76 billion, up 20% from the same period last year. On a retail basis, it closed at AU$1.39 billion, following a 4.7% increase, which Coles said was the first group EBIT growth the company achieved for the first time in four years. 

"In June 2019, Coles set out a refreshed strategy to transform our business and lay the foundations to succeed in our second century. Since that time, we have been presented with a number of unforeseen challenges … we are determined to emerge as a better, stronger business and team …for our many shareholders, we have successfully executed the first year of our strategic plan, restored group profit growth for the first time in four years, and are on track to grow long-term shareholder value," Coles Group CEO Steven Cain said.

The supermarket giant also reported Coles online sales revenue grew by 18% for the year, which the company said contributed a "modest profit" to its supermarket business, even after services were temporarily disrupted in March and April during the COVID-19 pandemic. It attributed part of the increase to its online capacity almost doubling through the rollout of its contactless click-and-collect services and the launch of its online priority service for vulnerable customers.

The company's 50% share in Flybuys handed it a AU$6 million loss. Despite this, the company said it continues to invest in Flybuys alongside Wesfarmers to enhance the digital experience by building a cloud-based data analytics and loyalty management platform.

The supermarket giant also noted that it has almost completed paying back current and former employees who were affected by incorrect salary payments.

The company launched its own review earlier this year and found that those who were paid a salary under the General Retail Industry Award (GRIA) -- which were approximately 5% of its supermarket and liquor store managers, or less than 1% of the Coles Group's total workforce -- were incorrectly paid. 

Coles said in February that it set aside AU$20 million to rectify the matter.

Alongside this, a class action against Coles was filed in the Federal Court of Australia in relation to the payment of Coles managers in May. Coles said given the court proceedings are in its early stages, the potential outcome and total associated costs are currently uncertain.

Looking ahead, the company said it would continue to focus on cost-cutting opportunities that will be driven by its smarter selling program, with hopes to achieve a AU$1 billion cost-out target between FY20 and FY23.

"In FY21, Coles will continue to focus on realising cost-out opportunities however, the timing will be dictated, in part, by COVID-19," Coles said.

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