Coles sales growth tipped to slow

Softer sales growth at Coles and Bunnings is expected to be revealed in a Wesfarmers sales report (AAP)

Softer sales growth at Coles and Bunnings is expected to be revealed in a first quarter report from parent company Wesfarmers.

The grocery price battle and increasing competition from Aldi are likely to be eating into sales growth at Coles.

While the supermarket giant is faring better than its rival Woolworths, analysts expect Coles has had a slower start to the financial year.

Deutsche Bank research analyst Michael Simotas expects like-for-like sales growth at Coles of 3.1 per cent in the three months to September, down from 4.3 per cent in the first quarter of 2014/15.

Lower fuel prices and increased price competition, partly triggered by the rise of German discounter Aldi, are behind the lower growth expectations.

Coles' parent company Wesfarmers, which also owns Bunnings, Kmart and Target, will release its first quarter sales report on Thursday.

Coles and Bunnings make up more than 90 per cent of Wesfarmers' operating profit, and Mr Simotas also expects sales growth at Bunnings to be lower than the same period a year ago.

He said Bunnings was robust and would still produce strong sales figures, but is coming off a period of rapid growth.

He expects like-for-like sales growth of seven per cent in the hardware business, down from 8.2 per cent a year ago.

OptionsXpress market analyst Ben Le Brun said the Wesfarmers results are likely to show its momentum is slowing.

"Low single digit growth is expected in the supermarket division and Bunnings is still expected to be best in class in the home hardware division," he said.

"The numbers should be okay but the winds are certainly coming out of Coles' sails and that is expected in a tough environment."

Coles has a strong lead on Woolworths, which is struggling for growth in its core liquor and food division.

Woolworths' comparable food and liquor sales rose just 0.7 per cent in 2014/15, despite spending $200 million on lowering prices in the second half of the year.

Coles achieved a 3.9 per cent increase in comparable sales in the same period.

Woolworths reports its first quarter sales on October 29.

Source AAP

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