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Coles Myer on $300m savings spree

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SYDNEY

Coles Myer Ltd today said its long term financial aims remain intact and it is targeting cost savings of $300 million a year by the end of fiscal 2004.

Chief executive John Fletcher told a UBS Warburg consumer products conference in Sydney today the retailer was maintaining a net profit target of $800 million by 2006.

An outline of the Mr Fletcher's briefing, released via the Australian Stock Exchange, said the company was looking for solid sales growth through to fiscal 2006.

Coles Myer said it was looking for high single digit growth per annum in the food and liquor division and mid single digit growth per annum in the general merchandise and apparel division, during that period.

Coles Myer said it was leveraging the group to generate cost savings, under a program called Operation Right Now.

It would seek annualised savings of $100 million in fiscal 2002, $210 million in fiscal 2003 and then $300 million in 2004.

The company said all fiscal 2002 cost savings would be reinvested, and a high percentage of savings in the period to fiscal 2004 would be reinvested to help build market share.

It added a continuous improvement program would be ongoing beyond fiscal 2004, with increasing benefits expected for shareholders.

Coles Myer said the initial focus of cost savings on general merchandise and apparel (GM&A) brands would now be expanded to encompass food and liquor and the group would look to share services, removing duplication and standardising processes.

It said it would look to optimise the distribution network.

Coles Myer said it would also target group return on investment of around 20 per cent by fiscal 2004.

Coles Myer said in the GM&A division it would also target an earnings before interest and tax (EBIT) margin of four per cent by fiscal 2006.

Structural options for the GM&A division would be reconsidered no later than fiscal 2004.

It said in the food and liquor division it would look for double digit EBIT growth per annum through to fiscal 2006, and a four per cent EBIT margin in 2005.