Supermarket chain Coles faces uncertain future

The giant supermarket, Coles is about to go through a very big change. But there is one burning question that has yet to be answered

Wesfarmers made it clear the performance potential of the huge supermarket chain was not good enough for them to continue owning it.
Wesfarmers will measure its success over the next decade based on the returns that we generate, not the size of our portfolio,” said Wesfarmers managing director Rob Scott on Friday. “While Coles still has many opportunities to grow … its earnings can now be expected to grow at a more moderate rate.”

The Coles business — which includes 800 supermarkets, 900 bottle shops and 700 convenience stores — has recently begun to struggle. In 2017 Coles revenue fell and so did profits. Wesfarmers shares rose sharply on the news that it was dumping Coles, up 6 per cent.
Part of the problem is Australians’ insatiable taste for lower prices. The average price of goods sold at Coles, excluding fresh food and tobacco, fell by 2.2 per cent in 2017. While a lot of the pain of those price cuts is passed onto suppliers, profit is harder to come by in a time of falling prices.
Coles can’t hike prices because if it does, shoppers will go elsewhere,