Australia’s Coles flags climate risk as floods push up inflation By Stocksak

© Stocksak. FILE PHOTO. People walk past Coles supermarket in Sydney, Australia after the removal of restrictions that were put in place to reduce the spread of coronavirus (COVID-19), on June 17, 2020. REUTERS/Loren Elliott

By Byron Kaye, Harshita Swaminathan

SYDNEY (Stocksak), -Australian No. 2 grocer Coles Group (OTC-:) Ltd identified climate as its next operational challenge Wednesday as floods pushed prices up in the first quarter. This raised sales revenue, but squeezed the farming supply chains.

The commentary shows one country’s most important companies acknowledging that extreme weather will become more common as the world warms.

The east coast of Australia, home to four-fifths the population, has been affected by floods in 2022. Treasurer Jim Chalmers stated that the floods were disrupting livelihoods, and driving up the cost of living, when he presented the federal budget on Tuesday.

Coles reported that supermarket sales increased 2.3% in the three months ending September. This was due to price inflation of 7.1%. This is nearly twice the 4.3% rate recorded in the previous quarter. Coles also stated that flooding would cause prices to rise further.

“We are very aware of the (fact that) the climate is changing, so we’re doing a lot to figure out how we can secure supply better, and to manage our way through the various things that will… continue to happen in the next 10 years,” Steven Cain, Coles CEO, told analysts during a conference call.

Most disruption caused by floods has been related to access to farms and not destroying entire crops. But Cain stated that it was unclear what the quality of the fruit would look like.

Comparable sales revenue, which includes liquor as well as a chain of service stations that Coles sold during the quarter came in at A$10.2 Billion ($6.52 Billion), up 1.8%

Coles shares dropped 3% mid-session against a flat overall stock market. Analysts weighed the impact inflation (which economists also blame for soaring energy prices) on profit growth.

The end of pandemic-era stockpiling likely contributed to declining sales volumes, but “trading down” is also likely contributing to this, Ord Minett analysts wrote in an email. They were referring to buying lower-quality products.

Also, shares of Woolworths Group Ltd’s larger rival Woolworths Group Ltd fell 3%. The company reported September quarter sales on November 3. Woolworths CEO Brad Banducci stated that inflation remains a concern and that the company expects the operating environment will remain challenging.

Australian inflation hit a 32-year-high of 7.3% in September quarter. Coles CEO Cain stated that cost of living pressures were changing customer behavior. Low-income customers were buying less fresh produce and more canned goods.

($1 = 1.5662 Australian dollars)

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