The Coles Group Ltd (ASX: COL) share price is having a subdued start to the day.
In morning trade, the supermarket giant's shares are down slightly to $14.92.
This follows the release of the company's first-quarter sales update.
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Coles share price lower on first-quarter update
For the three months ended 24 September, Coles reported a 3.6% increase in group sales revenue to $10,251 million.
The key driver of this growth was its supermarkets business, which reported a 4.7% increase in sales to $9,186 million. However, this is slower than the 6.4% sales growth reported by rival Woolworths Group Ltd (ASX: WOW) yesterday, which suggests potential market share losses.
Management advised that the Exclusive to Coles range experienced strong sales growth for the fourth consecutive quarter. Sales revenue for the range increased by 9.4% to $3.2 billion compared to the prior corresponding period.
Coles also highlights that customers continued to move into healthier options with revenue from Coles Own Brand health and lifestyle brands, including the Wellness Road, I'm Free From and Nature's Kitchen range, growing by almost 30%.
What about Liquor?
The company's Liquor business had a reasonable quarter, delivering a 1.8% increase in sales to $851 million.
Management advised that its sales growth during the quarter was supported by eCommerce growth of 32.2%, which was driven by strength in the on-demand channel. Penetration increased to 6.5% for the fourth quarter (7.7% including Coles Online). New stores also contributed to sales growth, with three new stores opened during the quarter and 19 stores opened in the second half of FY 2023.
The company advised that there was increased evidence of cost of living pressures impacting customer shopping behaviours during the quarter.
In the beer category, customers shifted back to mainstream and international brands, away from craft beer. Whereas in wine, growth in sparkling, prosecco, and rose was offset by lower champagne sales. In addition, the ready-to-drink category also grew strongly as customers traded out of full-bottled spirits for more affordable ready-made drinks.
Management commentary
Coles CEO, Leah Weckert, was pleased with the company's performance. She said:
During the quarter, we continued to focus on providing our customers with more value at the checkout through our 'Great value. Hands down.' campaign as well as everyday prices, weekly specials and personalised Flybuys offers. We added several features to make it easier and faster for customers to find value through our digital platforms. Our expanded Exclusive to Coles brand portfolio across food and liquor has never been more important, while collectible campaigns have also provided value to customers. Pleasingly for customers, availability continues to improve and inflation in key categories is moderating.
Outlook
Coles revealed that in the early part of the second quarter, supermarket and liquor sales revenue growth was broadly in line with the first quarter.
The company also advised that enhanced process, security and service measures to reduce total loss have been rolled out across supermarkets in the first quarter and will continue into the second quarter. This is expected to support improvements in waste and markdown, as well as reduce stock loss from theft.
A number of broader cost and margin optimisation measures have been initiated across the company with some benefits expected in the first half.
