Australia’s Coles flags local weather problem as floods push up inflation By Reuters

By Byron Kaye and Harshita Swaminathan

SYDNEY (Reuters) -Australian No. 2 grocer Coles Group (OTC:) Ltd flagged local weather change as its subsequent huge operational problem on Wednesday as floods pushed up costs within the first quarter, lifting gross sales income however squeezing the farming provide chain.

The commentary exhibits one of many nation’s greatest firms acknowledging that excessive climate occasions will seemingly grow to be extra widespread because the planet warms.

Australia’s east coast, house to four-fifths of the inhabitants, has endured floods by means of 2022 that Treasurer Jim Chalmers mentioned had been disrupting livelihoods and pushing up the price of residing when he delivered the federal funds on Tuesday.

Coles mentioned grocery store gross sales rose 2.3% within the three months to end-September, helped by value inflation of seven.1%, practically double the earlier quarter’s 4.3%, and added that costs would rise additional because of flooding.

“We’re very alert to the (reality) that the local weather is altering, and we’re doing plenty of work round how can we safe provide higher, to handle our method by means of these varied issues that can … proceed to occur over the following 10 years,” Coles CEO Steven Cain informed analysts on a name.

To this point, most disruption introduced by floods was associated to entry to farms reasonably than destroying complete crops, however Cain mentioned it was not clear what the standard of the fruit can be.

Complete comparable gross sales income, which embody liquor and a sequence of service station shops that Coles offered throughout the quarter, got here in at A$10.2 billion ($6.52 billion), up 1.8%.

Coles shares fell 3% by mid-session, towards a flat general market, as analysts weighed the impression of inflation, which economists additionally blame on hovering vitality costs, on revenue progress.

The top of pandemic-era stockpiling had seemingly contributed to declining gross sales volumes however “buying and selling down is probably going contributing to this as nicely,” Ord Minett analysts wrote in a word, referring to purchasing cheaper merchandise.

Shares of bigger rival Woolworths Group Ltd, which studies September quarter gross sales on Nov. 3, had been additionally down 3%. At its annual assembly, Woolworths CEO Brad Banducci mentioned inflation remained a priority and the corporate anticipated the working setting to stay difficult.

With Australian inflation at a 32-year excessive of seven.3% within the September quarter, Coles CEO Cain mentioned price of residing pressures had been altering buyer behaviour, with lower-income customers shopping for much less recent produce and extra canned items, and “catering in bulk” to scale back meals waste.

($1 = 1.5662 Australian {dollars})