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Australia's Coles Gets Quarterly Sales Boost As Shoppers Stockpile In Pandemic

Shoppers spent A$8.2 billion ($5.35 billion) at the company's 800 supermarkets in the three months to end-March

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Australia's second-biggest grocery chain Coles Group Ltd said on Wednesday supermarket sales leapt by a record 13.1% in the March quarter, boosted by a buying frenzy driven by the coronavirus pandemic and the subsequent lockdown.

The company said "unprecedented demand" due to customer stockpiling began in late February and continued through March as the government imposed social curbs to slow the spread of a virus that has infected 3 million people and killed 214,000 globally.

But Coles said shopping volumes were now moderating and shopping patterns would likely change permanently as the country enters a probable recession, with less "impulse" purchases such as softdrinks and more spending on ingredients to cook from scratch like baking goods.

"They're shopping less and they're buying more," said CEO Steven Cain on a call with analysts. "They're not loitering and looking at what other items they can put in their basket."

Shoppers spent A$8.2 billion ($5.35 billion) at the company's 800 supermarkets in the three months to end-March, A$1 billion more than the same period a year earlier, as the government halted out-of-home dining in response to the virus.

With unemployment expected to double in the coming months, Coles expects shoppers to save money by buying larger packs and more house-brand goods.

Larger rival Woolworths Group Ltd is scheduled to show similar patterns in a quarterly update on Thursday.

Though shares of both companies have held steady in the coronavirus-related market turmoil, analysts have said they favour Coles since the company gets a higher percentage of sales from groceries.

Still, shares in Coles fell 3% by mid-session on Wednesday in a flat overall market. Since Feb. 20, Coles shares are down 3%, compared to a 25% dive in the broader Australian market.

"Peak demand in the supermarkets division has now passed," said Goldman Sachs analysts in a client note.

Analysts also noted a slowdown in online sales growth as Coles suspended the service due to stock being sold out in stores. Online sales grew 14% in the March quarter, compared to 24% in the previous year, it said.

The company, which along with Woolworths has hired thousands of staff to keep shelves stocked, said it was also experiencing an "elevated cost base" related to remuneration, cleaning, security, and installing protective screens at check-out counters.

Convenience store sales were lower and the division was expected to post a net loss for the full year because of a downturn in petrol consumption related to the stay-home order, the company said.


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