Australia: Expert condemns Coles for misleading market

TONY EASTLEY: Already accused of releasing misleading figures to the market, one of Australia's biggest retailers is now facing claims of making matters worse.

As exclusively reported on AM earlier this month, a series of internal Coles emails leaked to the ABC revealed that the retailer's finance department in November was saying one thing about the sales performance of its Bi-Lo supermarkets, while the corporate affairs division was saying something else.

This week the Coles Group's Chief Financial Officer Fraser MacKenzie released the company's half yearly profit results and tried to set the record straight.

But Professor Paul Kerin from the Melbourne Business School has done his own analysis and is speaking here with AM's Lindy Kerin.

PAUL KERIN: Fraser MacKenzie, the CEO on Monday went through a series of numbers to try and reconcile the Coles claim that was made last November versus the claim that was made in an email that was disclosed on AM sometime ago.

The numbers appear to check out, the numbers he presented do seem to be internally consistent. The issue though is, that doesn't excuse Coles Myer.

It's a little bit complicated but in short, the claimed sales uplift due to the Bi-Lo conversions was now 6.2 per cent according to Fraser MacKenzie.

Now that is significantly less than what John Fletcher said on November 15 when he said that the sales uplift was seven to eight per cent. MacKenzie seemed to think everything was okay because the gross sale, total sales uplift in those stores compared to the previous years was under his calculation, 7.3 per cent.

And on the surface, 7.3 per cent is within the seven to eight per cent range, however the seven to eight per cent range which is not the gross sales uplift year on year, it is the uplift due to the Bi-Lo conversions which even on McKenzie's number is 6.2 per cent.

Now McKenzie was emphatic in saying that Coles knew those numbers before November 15 and yet they still said that the sales uplift due to conversions on November 15 was seven to eight per cent.

That was incorrect. LINDY KERIN: How serious is this?

PAUL KERIN: Well I think it's very serious, not only was the statement made on November 15 not true, they've compounded the problem by trying to talk it away last Monday.

Not only was the statement made on November 15 not true, the statement that everything was hunky-dory which was the message coming out on Monday is also not true.

LINDY KERIN: Isn't it all immaterial anyway, given the Board has admitted the Bi-Lo conversions are a disaster?

PAUL KERIN: It was predicted by many analysts including me that the Bi-Lo conversions would be a disaster right from the start because it was a dumb strategy in the first place.

Fletcher has blamed it all on execution, which much frustrate the hell out of Coles Myer employees who have been trying their hardest.

It was basically a dumb strategy in the first place. So you know, strategically it was wrong, but the point is that they should have fessed up and told the market what they knew on November 15.

6.2 per cent is significantly below seven to eight per cent, particularly when you consider the amount of money that they were spending on Bi-Lo conversions.

TONY EASTLEY: Professor Paul Kerin from the Melbourne Business School speaking to Lindy Kerin.

Source: abc.net.au