Australia's Coles profit meets Street view, dividend highest in over 5 years

By Sameer Manekar

(Reuters) -Australian grocer Coles Group reported a first-half profit in line with market expectations and declared its highest dividend in at least five years on Thursday, helped by the holiday shopping frenzy and a strike at larger rival Woolworths.

Shares of the retailer jumped 4% to an all-time high of A$20.48 per share in early trade, compared with a 0.3% rise in the ASX200 benchmark index as of 2312 GMT.

Underlying earnings at its Supermarkets segment, Coles' biggest money-making business, jumped more than 14% to A$2.03 billion as consumers saddled with high living costs shopped for cheap and discounted items, particularly during the holiday season.

In comparison, earnings at Woolworths' Australian Food business fell 5.4% during the first half, as rising living costs spurred bargain-hunting and a warehouse strike left shelves bare.

Coles capitalised on the warehouse strike at Woolworths by doubling down on its supply chain and hiring more people at its stores in Victoria and New South Wales, resulting in incremental sales of A$120 million.

Sales at Coles' Supermarkets segment grew 4.3% during the first half, outpacing the 2.7% growth at Woolworths' Australian Food business.

Coles was able to continue the momentum into the third quarter as sales revenue grew by 3.4% at Supermarkets over the first seven weeks, compared with a 3.3% growth at Woolworths' Australian Food.

"Solid result with sales outperformance relative to Woolworths and strong margins," analysts at Jefferies said.

"Coles and Woolworths sales are tracking at similar levels into third quarter, but Coles is cycling more demanding comparables, suggesting it has maintained leadership."

Coles, Australia's second-largest supermarket chain, reported net profit after tax from continuing operations of A$576 million for the six months ended December 31, largely in line with the Visible Alpha consensus estimate of A$574.1 million.

That compares with A$594 million it posted a year ago.

On an underlying basis, profit came in at A$666 million, ahead of A$626 million reported last year.

Coles declared an interim dividend of 37 Australian cents per share, its highest since at least fiscal 2019, and slightly higher than 36 Australian cents apiece distributed a year ago.

Separately, Coles also announced its Chairman James Graham would retire from the board on April 30, and will be replaced by Peter Allen, a former chief executive officer at shopping malls operator Scentre Group.

($1 = 1.5873 Australian dollars)

(Reporting by Sameer Manekar and Roshan Thomas in Bengaluru; Editing by Alan Barona and Mohammed Safi Shamsi)