Coles' sales revenue was up 6.8 per cent to $22.2 billion in the 27 weeks to December 31, but its profit fell 3.6 per cent to $594 million when compared to the same period a year ago, the company announced on Tuesday.
Coles chief executive and managing director Leah Weckert, whose business is facing an industry-wide government inquiry into pricing practices, told reporters Coles makes just $2.60 in profit for every $100 spent in its stores, a margin she said hadn't risen for the past five years.
"Profits are an essential thing for any business," she said.
"They enable us to continue to operate and that means we get to continue to employ 120,000 people.
"We get to support thousands of suppliers. We pay a very large tax bill every year - we're one of the top 100 taxpayers in Australia," she said, adding that Coles also pays dividends to 440,000 shareholders, 80 per cent of whom own less than 2000 shares
"So they are mums and dads and families and retirees that are benefiting from these dividend payments."
CEO Leah Weckert says Coles makes just $2.60 in profit for every $100 spent in its stores. (HANDOUT/COLES)
Coles said on Tuesday its dividend would stay stable at 36 cents per share, fully franked.
Coles' profit dropped as the supermarket group incurred higher lease costs and higher costs of borrowing.
Those two items were roughly equal contributors to Coles' financing costs rising by $26 million to $213 million, chief financial officer Charlie Elias said.
"Just like households that are paying higher interest rates on their mortgages, we are paying higher levels of interest on the debt that we pay to operate the business," Ms Weckert said.
Rents have also been increasing, and are a significant cost for Coles, said Ms Weckert, who will appear at the Senate inquiry into the cost of living on Friday.
Following Coles' earning announcement, the Australian Council of Trade Unions said the chain should reduce prices.
"Working families have had a gutful of Coles and Woolies making up excuses for price gouging farmers and customers, all while they rake in mega profits," said ACTU assistant secretary Joseph Mitchell.
"It's well past time for Coles and Woolies to be passing on the benefits they've received in falling inflation."
Ms Weckert said that Coles had lowered prices on hundreds of items over the past six months and that overall food inflation had moderated recently, with fresh produce and meat prices dropping, while dairy inflation remained high.
Ms Weckert said that food inflation had been significantly lower in Australia than other developed economies, and a lot of it had to do with higher import prices, partly due to the war in Ukraine and its impact on wheat prices.
Coles has denied being part of a duopoly and says the chain faces intense competition. (Joel Carrett/AAP PHOTOS)
Denying that Coles is part of a duopoly, Ms Weckert said the chain faces intense competition not just from Woolworths but also Aldi, Costco and Amazon as well as independent supermarkets and a wide range of retailers such as Chemist Warehouse, Priceline and Bunnings, all of which stock items that Coles also sells.
"From my perspective, it is a competitive market, we are having to work hard every day to work out how we attract customers into our stores," she said.
Ms Weckert said a number of changes had reduced store thefts, which had been an issue coming out of the pandemic.
The measures include better training, security at its entrances and exits and technological solutions, she added.
E&P Capital retail analyst Phillip Kimber said it was overall a strong result from Coles, with sales momentum accelerating in its key supermarket business while slowing in its smaller liquor store division.
Late on Tuesday afternoon, Coles shares were up 5.5 per cent to a six-month high of $16.755
