Coal prices hurting Coles' parent company

Coles' parent company Wesfarmers has warned solid earnings from its retail businesses will be offset by an expected full year loss from its coal mines.

Wesfarmers managing director Richard Goyder says the conglomerate's core business, Coles, has made a strong start to the 2016 financial year.

He says ongoing investment in lowering food and grocery prices and better customer service were increasing transaction volumes and leading to bigger basket sizes.

The group's other retailers, Officeworks, Kmart and Target are also meeting expectations.

However the industrial division, which includes coal mines, is under pressure largely due to weak coal export prices, Mr Goyder told shareholders at Wesfarmers' annual general meeting on Thursday.

"Our portfolio of businesses overall, is tracking to expectations, with good momentum in our retail divisions being offset by the performance of our industrials division, notably the difficult trading experienced in our resources business," he said.

"The outlook for the 2016 financial year therefore remains challenging and we expect our resources business to be loss making at the earnings before interest and tax (EBIT) level this year."

He said Target's transformation, the group's weakest performing retailer, was making satisfactory progress.

"Customers are responding favourably to the investment made in higher quality, lower prices, every day," he said.

"The focus will continue to be on the customer... both in-store and online, and investing in lower prices as Target makes fashion, style and quality more affordable for the whole family."

In October, Wesfarmers released strong quarterly sales results for Coles.

Price cuts across a range of items helped push up food and liquor sales by 4.7 per cent to $7.6 billion during the three months to the end of September with comparable food and liquor sales rising 3.6 per cent.

However, the pace of growth was not as strong as a year ago.