Coles
Group
is
in
the
final
six
months
of
its
four-year
cost-out
transformation
known
as
‘smart
selling’
and
is
now
planning
for
a
fresh
iteration
of
the
program.
The
transformation,
announced
in
mid-2019,
was
intended
to
reduce
costs
groupwide
by
$1
billion
by
the
end
of
FY23,
and
retiring
CEO
Steve
Cain
said
this
remains
on
track.
Automation,
data
analytics
and
artificial
intelligence
are
among
the
technology
enablers
of
this
transformation,
and
the
retailer’s
first
half
results
point
to
ongoing
investments
in
that
area.
Accenture
also
has
a
role
in
the
transformation,
working
with
technology
stacks
from
Microsoft
and
SAP.
The
retailer
has
fairly
consistently
hit
targets
of
around
$100
million
to
$125
million
in
costs
saved
per
half,
or
$230
million
to
$250
million
per
year,
so
far.
Cain
said
approximately
$100
million
of
cost-out
benefit
was
delivered
in
the
most
recent
half
year.
He
flagged
another
iteration
of
the
program
is
likely
to
begin
sometime
after
the
current
one
expires;
which
could
make
it
similarly
structured
to
Telstra’s
consecutive
T22
and
T25
transformations.
“With
the
smart
selling
program
due
to
conclude
this
financial
year,
planning
for
smarter
selling
two
is
well
advanced,”
Cain
said.
The
retailer’s
slide
deck
provided
little
additional
detail
on
the
planned
second
version
of
smart
selling,
though
it
suggested
more
investment
in
“digital,
data
and
technology”.
In
the
six
months
to
December
31,
Coles
reported
a
range
of
improvements
from
its
use
of
AI
and
digital
technology.
“We
saw
the
efficiencies
in
the
business
through
the
rollouts
of
fresh
produce
easy
ordering
to
almost
300
stores
enabling
improved
availability
and
freshness
for
customers
through
AI
technology,”
Cain
said.
The
retailer
expanded
its
use
of
advanced
analytics
and
store
specific
data
to
optimise
markdowns
on
perishable
items.
The
algorithm
now
works
with
bakery
items,
in
addition
to
fresh
produce,
meat
and
dairy.
Coles
also
rolled
out
its
‘fresh
easy
ordering’
program
to
almost
300
stores
across
the
half,
“enabling
improved
availability
and
freshness
for
customers
through
AI
technology”
via
the
cloud-based
platform,
Relax.
Witron
and
Ocado
progress
Providing
an
update
on
its
Witron-powered
distribution
centres
(DCs),
Cain
said
Coles
has
“achieved
a
key
milestone”
by
taking
hold
of
the
first
facility
in
Redbank,
Queensland.
In
January,
the
Redbank
centre
began
receiving
in-bound
inventory
deliveries.
“I’m
expecting
to
open
this
particular
Witron
facility
on
April
27,
subject
to
everything
going
well,”
Cain
said.
Outbound
store
deliveries
are
scheduled
to
start
in
the
fourth
quarter
of
FY23.
Calling
it
a
“sight
to
behold”,
Cain
said
the
facility
is
the
largest
automated
distribution
centre
in
the
southern
hemisphere.
“As
we
look
at
our
automation
projects,
I’m
more
confident
than
ever
that
they
were
the
right
investment
for
Coles
at
the
right
time
and
that’s
particularly
so
in
the
face
of
increasing
wage
costs
across
the
nation
and
globally,”
Cain
said.
External
building
works
are
not
complete
at
the
Witron
site
in
Kemps
Creek,
NSW
with
Witron
“installing
its
automation
with
a
view
that
that
will
be
completed
in
the
third
quarter
of
FY24”.
Construction
progress
on
its
Ocado
online
customer
fulfilment
centres
(CFCs)
has
made
progress
in
both
NSW
and
Victoria.
The
Truganina
automated
CFC
in
Victoria
is
now
in
recruitment
mode
with
key
leadership
roles
now
in
place,
while
the
Wetherill
Park
automated
CFC
in
NSW
saw
some
work
delays.
“Based
on
information
from
Ocado
we’re
working
towards
the
Victorian
CFC
being
commissioned
ahead
of
the
NSW
one
with
an
incremental
ramp-up
period
commencing
mid-24
as
previously
advised,
and
the
NSW
CFC
now
in
the
second
half
of
FY24,”
Cain
said.
“The
revised
timeline
is
not
currently
expected
to
have
a
material
impact
on
Coles
estimated
total
capital
expenditure
of
the
project”.
Digital
action
Over
the
first
half,
Cain
said
Coles
launched
its
exclusive
Flybuys
member
pricing
and
digitised
Coles
Express
fuel
dockets,
which
“offered
greater
personalised
value
through
individually
tailored
offers”.
Flybuys
membership
was
up
nine
percent
and
redemptions
were
up
by
14
percent.
It
also
expanded
its
supermarket
ecommerce
‘Rapid
Click
&
Collect’
offer
to
almost
400
stores,
which
lets
customers
order
and
pick
up
in
under
60
minutes.
In
addition,
Coles
said
website
and
app
improvements
made
it
simpler
to
transact
digitally.
“Finally,
we
accelerated
investment
in
our
retail
media
platform
which
we
rebranded
as
‘Coles
360’
focusing
on
technology
and
talent,”
Cain
said.
Expected
spend
Coles
chief
financial
officer
Charlie
Elias
said
gross
operating
capital
expenditure
(capex)
on
an
accrued
basis
was
$623
million,
an
increase
of
$205
million
compared
to
the
prior
corresponding
period.
“Within
supermarkets
capex
increase
due
to
investments
of
Witron
and
Ocado
transformation
projects
…
but
we
have
incurred
approximately
$900
million
of
the
planned
$1.37
billion
capex
[for
these
facilities]
to
date,”
Elias
said.
“Other
efficiency-related
capex
includes
investments
in
service
transformation,
including
trolley
assisted
checkouts
and
the
fresh
produce
easy
ordering
program.”
Liquor
capex
increased
during
the
half,
driven
by
new
store
openings
and
renewals
–
with
16
new
liquor
stores
and
128
renewals
–
as
well
as
investments
in
IT
systems.
Capital
expenditure
is
still
expected
to
be
in
the
range
of
$1.2
billion
to
$1.4
billion
for
the
full
year,
inclusive
of
the
major
automation
projects.
Total
sales
revenue
rose
3.9
percent
to
$20.8
billion
while
net
profit
after
tax
reached
$616
million.
As
Cain
steps
down,
long-time
Coles
employee
Leah
Weckert
will
take
over
as
Coles
Group
CEO
this
May.
Weckert said
Coles
has
“a
transformational
strategy
that,
through
the
hard
work
of
our
130,000
team
members,
will
deliver
better
experiences
for
customers
and
create
value
for
shareholders.”
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