Coles’ first net profit falls 29pc after restructuring, demerger costs

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Coles is stepping up investment on stores, distribution and e-commerce and doubling down on costs after warning investors it would take at least a year to return to profit growth.

In a frank assessment of Coles’ prospects, new chief executive Steven Cain said Australia’s second largest food and liquor retailer faced multiple challenges, including costs rising faster than sales, fast-changing consumer shopping habits and margin dilution from the shift to online shopping.

Coles was also losing market share in NSW, particularly in wealthier suburbs, discounting was eroding customer trust and store refurbishments were delivering varied results.

“It’s time to reset the Coles business to achieve sustainable long-term growth for our shareholders, a strategic refresh to ensure we appropriately address the headwinds facing the company,” Mr Cain said on Tuesday after unveiling a slightly weaker-than-expected first-half result, the first since its $20 billion demerger from Wesfarmers.

Mr Cain said Coles had achieved unprecedented earnings growth over the past eight years under Wesfarmers, but now needed to “reset” strategy to set the retailer up for sustainable long-term growth.

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