Coles CEO Leah Weckert has paid a personal price for the supermarket’s misleading “Down Down” discounts, with the board docking her annual pay by more than $400,000.
Coles’ Annual Report, released today, shows the board has withheld $414,000 in discretionary payments to Weckert after the Federal Court found the chain had duped customers by temporarily raising shelf prices, then lowering them again, to suggest shoppers were getting a “Down Down” deal.
Despite the hit, Weckert is still one of the country’s top-paid CEOs and pockets around $6 million a year.
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Coles’ Chief Operating Officer Matt Swindells has also been penalised for the scandal, with his pay cut by $82,800, while former CEO Steven Cain, who’s since the left the company, will take a hit to his exit package.
The court is yet to rule on any corporate fines or customer compensation in the case, with Coles uncertain of the financial implications for the company.
In determining penalties for Weckert only, directors also took into account a separate Federal Court battle relating to historical underpayment of Coles staff, where the company has set aside a whopping $235 million for backpay.
The settlement has hit Coles’ bottom line, with the company on Tuesday announcing a $1.09 billion annual profit, up 1 per cent.
Despite a battering from Woolworths’ hugely successful Ooshies collector campaign in recent weeks, Coles says trading remains strong, with supermarket sales continuing to surge as shoppers stock their pantries.
“More and more customers are telling us that they’re eating more at home, rather than out of home,” Weckert told an analyst briefing on Tuesday.
“We know value remains front of mind for Australian households.”
Grim inflation warning as customers hunt value
However, Australia’s second biggest supermarket operator continues to sound alarm bells on grocery inflation, with Chief Commercial Officer Anna Croft issuing a grim warning of more to come.
“I do expect we will see inflation higher in the next 12 months than in the previous 12,” she said, singling out meat and dairy, while saying Coles was alert to potential hikes for poultry and eggs as well if the nation’s bird flu outbreak spreads to commercial farms.
Coles says customers remain highly value-conscious and are “cross-shopping” with its competitors to take advantage of specials.
In response, it’s taking a more targeted approach to weekly discounts.
“This is about making specials truly specials,” said Weckert.
In a reflection of the current environment, the chain is seeing good growth from its budget-minded Coles Own brands, with popular Coles Ultra cleaning products and Coles PerFORM protein meals seeing double-digit sales growth.
Sales of the Coles Finest range, which now includes specialty meats and frozen desserts, were up 9 per cent.
Coles is also pushing harder with its FlyBuys loyalty program, which has now hit 10 million members, many of whom are saving points to pay for groceries.
Coles says theft, which has been a symptom of higher living costs in recent years, is moderating thanks to new technologies, though customer abuse of staff remains a problem.
“Pleasingly, state governments are starting to really progress with some of the changes we really need to tackle these repeat offenders,” said Swindells.
Online sales surge as Coles embraces AI
Customers are loving new takes on convenience, with online sales up 26 per cent.
Coles says its Click and Collect wait times are improving, while it’s delivering more same-day orders across Sydney and Melbourne.
“Customers can even shop later at night now for delivery the next morning,” said Weckert, who’s also excited about a new partnership with Uber Eats, offering speedy delivery on demand.
Coles also sees big opportunities for artificial intelligence to improve the shopper experience, with consumers already using AI tools to help them shop.
“Customers are using those more than they’ve ever used them before to compare prices,” said Weckert.
“We’re pretty excited about what comes next.”
Alcohol sales down, down
However, Coles says higher living costs are causing shoppers to pull back on alcohol, with sales at its Liquorland stores down 3.3 per cent for the year.
Sales are particularly sluggish at some box Liquorland Warehouse stores, which are struggling amid strong competition from a re-energised Dan Murphy’s.
Coles will open another 45 stores in the next two years, mainly to plug gaps in its store network. A further 150 sites will be given renovation makeovers.
