Coles' food and liquor sales growth has eased further as the supermarket price war ramps up with German discounter Aldi's aggressive expansion.
Food and liquor sales rose 4.7 per cent to $7.6 billion in the three months to the end of September, reflecting slower growth than the 5.8 per cent rise Coles posted in the same period a year ago, parent company Wesfarmers' trading update shows.
Total sales for Coles were 2.1 per cent growth, down from a four per cent rise a year ago.
A food and liquor price decline of 1.3 per cent was the strongest level of quarterly deflation in two years, Coles managing director John Durkan said.
He said this encouraged shoppers to buy more.
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"Customers responded positively to continued strong price investment, and this was evident in the growth in volumes, transactions and basket size recorded during the quarter," Mr Durkan said.
Coles has been investing strongly in rolling out more private labels and providing "everyday" low prices, a strategy German discounter Aldi also uses.
Woolworths is also investing heavily in lowering its food and grocery prices as Aldi is set to expand into South Australia and Western Australia.
The price war is driving cheaper food and liquor, in a bonus for consumers, but is eating into Coles' and Woolworths' profit margins.
"Customers are unwavering in their feedback that they want great prices, not just on key lines but across the product range, combined with great customer service, and this is exactly what we're determined to deliver right across Australia," Mr Durkan said.
Wesfarmers' home improvement and office supplies division, made up of Bunnings and Officeworks, recorded a 10.8 per cent lift in sales, up from 10.5 per cent a year ago.
Elsewhere in the business, Kmart had a significant jump in sales of 12.5 per cent, compared to 2.9 per cent and Target had a 3.1 per cent rise, up from a 4.6 per cent decline.
WESFARMERS' BUSINESSES ON THE RISE
* Coles food & liquor up 4.7pct to $7.6b
* Coles convenience down 7.8pct to $1.8b
* Bunnings up 11.6pct to $2.5b
* Officeworks up 6.5pct to $429m
* Kmart up 12.5pct to $1.1b
* Target up 3.1pct to $776m
