Australia's second biggest supermarket chain Coles has suffered its biggest share price plunge since Covid as its CEO makes a major gamble to win shoppers back.
The grocery giant said increased promotions from rivals – particularly Woolworths, which just finished its successful Disney Ooshies campaign – along with cost savvy customers comparing prices online has damaged its profits.
In addition to Woolworths, there is competition from Aldi, Chemist Warehouse and now Amazon, which has moved heavily into supermarket item territory.
Chief executive Leah Weckert confirmed at a briefing on the retailer's performance on Friday that cash-strapped shoppers are looking for bargains across a bigger range of retailers than before, and Coles needs to draw them back.
'Online growth for us during the quarter was very strong... where we would say we're not happy with momentum at the moment is in the bricks and mortar sales.'
'We are continuing to see a really good level of customer count coming through the store, but we're seeing a lot more splitting of baskets.'
She said one of the ways Coles was seeking to draw in customers was to bring back its 'Every Day Price' programme, which has been on the backburner for years.
It locks in lower prices for thousands of products for at least six months to appeal to stretched household budgets, which are expected to be stretched further by another Reserve Bank interest rate rise on Tuesday afternoon.
Coles CEO Leah Weckert (pictured with brand ambassador and chef Curtis Stone) is trying to win back customers as the supermarket battles Woolworths, Chemist Warehouse and Amazon
Coles was previously slammed in a scathing report by the ACCC for giving false impression of discounts to shoppers
'We know household budgets are under pressure... There is more to do to ensure we are front of mind for customers in this environment and we are taking action to sharpen our offer over the coming months,' Weckert said.
Coles' bottom line will take a hit but Ms Weckert is gambling that short-term pain will turn into long-term gain by winning back loyalty from shoppers.
The stock market was spooked, however, with the Halloween weekend seeing the company's share price take a dive.
Coles stock finished 7.7 per cent lower at $21.66 on Friday, its weakest trade since late March 2020.
This made it one of the worst performers on the broader ASX 200 index and its stock price remained around that level on Monday, closing out the day at $21.28.
This was also propelled by higher fuel costs the supermarket's freight network is dealing with amid the conflict in the Middle East.
Rival Woolworths share price was at $39.46 on Monday.
The 'Every Day Price' programme would replace its previous 'Down, Down' promotion, which has been phased out following a probe from consumer watchdog the Australian Competition and Consumer Commission (ACCC).
Coles' stock price plunged on Friday and is still around that level
The ACCC alleged, and a court agreed, that Coles had temporarily hiked, then lowered the prices of items under that promotion to give shoppers the false impression of discounts.
Along with the price promotion revamp, Weckert said another tactic the supermarket would use to win back customers was to increase its 'Exclusive to Coles' range, particularly ahead of the peak Christmas season.
Coles, which operates 870 supermarkets and 988 liquor outlets under brands like Liquorland and Vintage Cellars, reported a 2.2 per cent rise in group sales to $11.2billion in the 13 weeks ended September 27.
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