Coles denies price gouging, says food inflation is global

Coles and rival Woolworths now face Senate and competition regulator inquiries into how they set prices. — Reuters

SYDNEY: Australia’s No. 2 supermarket operator Coles Group rejected accusations of price gouging as its first-half profit beat analyst forecasts, saying food inflation was a global problem and its margins were steady.

Coles and larger rival Woolworths Group, which together account for two-thirds of Australian grocery sales, have been accused by lawmakers of using their market dominance to put up shelf prices more than needed at a time when 13 interest rate hikes have left more people struggling to pay their mortgages.

The companies now face Senate and competition regulator inquiries into how they set prices, with some politicians calling for more aggressive anti-cartel regulation and even for them to be broken up.

Coles posted an underlying profit of A$589mil for the six months to Dec 31, down 8.4% on the same period a year earlier but 5% above the average analyst forecast.

Coles chief executive officer Leah Weckert said the company’s earnings margins had remained flat for years and it needed profit to pay employees, suppliers and shareholders.

For at least five years the company had made less than three cents of profit for every dollar spent by shoppers, and “it has not gone up as we have seen inflation come through”, she told reporters.

“Food inflation has been faced everywhere in the world,” Weckert said.

“It is a global issue. It is not unique to Australia.”

The company said the pre-tax earnings margin of its supermarket division shrunk to 5.1% in the half, from 5.3% a year earlier. Supermarket price inflation slowed to 3%, from 7.4% a year earlier, it added.

Supermarket sales rose 4.9% to A$19.8bil, ahead of analyst forecasts collated by market aggregator Visible Alpha, and the company said that growth rate had continued in the first eight weeks of 2024. — Reuters

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