* Coles sees price deflation moderating as fruit, vegetable
* Coles head says consumer sentiment still down vs year ago
* Bunnings Q1 same-store sales up 2.5 pct, Target down 4.1
(Adds details, quotes)
MELBOURNE, Oct 25 Australia's Wesfarmers Ltd
said like-for-like sales at its Coles supermarkets grew
3.7 percent in its fiscal first quarter as a long-running price
war enticed cost-conscious shoppers and boosted sales volumes.
That beat average market forecasts for 3.4 percent growth,
according to a Reuters survey of six analysts, and compared with
growth of 2.3 percent at top rival Woolworths Ltd.
Australian retailers in general have been forced to deeply
discount and accept shrunken profit margins as consumers respond
to economic uncertainty and falling home and share market values
by freezing spending.
"Our customers are as focused on value now as they have ever
been, with consumer sentiment still slow to recover to levels
seen last year," said Coles Managing Director Ian McLeod.
The retail-to-coal company said food-and-liquor price
deflation was 3.2 percent in the first quarter, driven by a
price war as Coles competes with Woolworths.
Both chains, which control over 70 percent of the grocery
market, have slashed the cost of basic items such as food, milk
and meat to win foot traffic.
Coles, which has now had food and liquor price deflation for
12 of the last 13 quarters, said a rise in fresh produce prices
would slow price deflation through the course of the year.
First-quarter sales at Wesfarmers' home improvement chain
Bunnings rose 2.5 percent at stores open more than a year, while
discounter Target saw same-store sales fall 4.1 percent as it
reduced the price of toys.
Discounter Kmart had a 2.2 percent increase in sales.
"We like the effort in Coles but think the turnaround in
Target is taking too long," said Peter Esho, analyst at Citi
"We think the share price will struggle to maintain a rally
above A$35 per share until the other pieces of the pie fall into
The stock closed Wednesday at A$34.60, off a March low of
In its coal business, Wesfarmers agreed an average 26
percent drop in prices for its metallurgical coal exports as a
slowdown in demand from Asian buyers bites.
Wesfarmers said the average contract price for its Curragh
hard coking coal would be $160 per tonne, free-on-board in the
December quarter, versus $220 per tonne in the September
(Reporting by Miranda Maxwell; Editing by John Mair)