Wesfarmers is optimistic for the current financial year that the company plans to open 19 Coles stores and refurbish 400 outlets in the coming months.
Richard Goyder, the managing director of Wesfarmers, shared the expansion plans of the firm in a strategy briefing on Wednesday. He confirmed the growth enjoyed by Coles amid the generally weak retail environment in Australia based on the estimated $26.5 billion increase in food and liquor sales of the giant supermarket chain from $21 billion the previous year.
Besides opening 19 new stores, refurbishing 400 and extending 10 more, Mr Goyder disclosed that Coles will increase floor space by 2 per cent each year in its bid to dominate the supermarket sector. However, Coles will also close 11 outlets.
Across Australia, retail sales dipped 0.2 per cent, which economists said strengthened the reasons for more interest rate cuts.
One reason behind the strong performance of Coles, as well as that of rival Woolworths, is their increasing reliance on store brands which tap cheap foreign labour in South Africa and Thailand. With lower labour costs, the supermarket giants could afford to bring down the prices of these commodities which help Australian consumers cope with inflation, said Coles Managing Director Ian McLeod.
However, Mr McLeod stressed that most of Coles' private label brands are sourced from local produce which supported the creation of 10,000 new jobs through their suppliers. He said Coles' volume growth yielded $1.6 billion in extra fresh food sales which doubled the value of produce sources directly from Aussie farmers. Mr McLeod insisted that about 90 per cent of its in-house brands are Australian-made, 97 per cent of its fresh produce are grown in the country and 100 per cent of its meat raised in Australia.
Mr Goyder also disclosed in the briefing that Mr McLeod extended his contract with Coles. In the last financial year, Mr McLeod earned $15.6 million, excluding performance bonuses. He was previously with Halfords, a British bicycle and auto parts chain, and moved to Coles in 2008.
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