Cheap chickens, squeezed toothpaste and cut-price Kleenex have helped Coles deliver better-than-expected grocery sales in a sign the supermarket giant is winning over customers from arch-rival Woolworths.
Coles splashed out about $150 million on lowering food and liquor prices during the March quarter and the hefty price investment has driven its comparable food and liquor sales up 4.9 per cent, with total sales amounting to $7.52 billion.
This is higher than market expectations of 4.5 per cent comparable growth, and considerably better than the 3.8 per cent recorded in the same quarter a year ago.
Coles owner Wesfarmers chief executive Richard Goyder said the group has been ramping up its investment into lower prices each quarter, including price drops in roast chicken, Colgate toothpaste and Kleenex tissues.
"Cooked chickens, we have had deflation there but we have had a really significant volume uptick so it has worked," Mr Goyder said.
"Over this time last year we think we have picked up some (more market) share."
Analysts say the stronger-than-expected same-store sales growth is proof that Coles continues to steal market share from Australia's largest supermarket network, Woolworths.
Bell Direct equities analyst Julia Lee said how much Coles' lower prices have cost in profit remains to be seen.
"It looks like Coles has gained market share versus Woolworths with Coles' market share probably getting closer to that 29 per cent mark," Ms Lee said.
"But the question is at what cost?"
Mr Goyder said competition was stiff and the expansion of German discounter Aldi was hurting.
"Aldi's expansion into South Australia had an immediate effect but that is stabilising," he said.
"Woolworths has certainly promotionally been investing more in recent times."
Elsewhere in the business, Bunnings continues to impress with comparable sales lifting 8.3 per cent, while Kmart's like-for-like sales rose 15.2 per cent.
Officeworks also recorded comparable sales growth, while Target's adjusted comparable sales dipped 0.8 per cent.
The group's coal division also continues to struggle with production for the quarter falling significantly compared to the same period a year ago, partly due to recent heavy rain.
Wesfarmers' share price closed $1.14, or 2.78 per cent, higher at $42.20 on Thursday.
WESFARMERS' 3Q PERFORMANCE (HEADLINE SALES FIGURES):
* Coles food & liquor up 5.9pct to $7.52b
* Coles convenience down 8.9pct to $1.45b
* Bunnings up 11.0pct to $2.59b
* Officeworks up 5.6pct to $512m
* Kmart up 17.9pct to $1.10b
* Target up 2.3pct to $678m
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