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Coles CEO hints that pokies are needed for growth

Thu, Feb 21, 10:15am by Staff Writer

The new chief executive of one of Australia’s biggest supermarkets has given no indication that company will relinquish ownership of its 3000-plus poker machines.

Steven Cain, the chief executive of Coles Supermarkets, admitted to The Sydney Morning Herald that the company needs a “strategic reset” that will bring on new investments to counter increasing costs and slowing sales momentum.

Mr Cain took Coles’ top job in September 2018 and delivered his first earnings result since the supermarket was demerged from parent company Wesfarmers in November 2018.

“We need to look closer at our cost base, so that we can afford to invest in the future,” Mr Cain said.

“We’re going to have to invest a significant amount of money over the next five years to take advantage of the opportunities ahead of us,” he said.

Coles’ earnings were not growing at a fast enough pace for parent company Wesfarmers, who cut ties recently.

Coles’ earnings grew 125 per cent between 2009 and 2016, but they have fallen 19 per cent since then.

It’s sales growth had dipped 1.3 per cent in the three months to December according to recent reported, despite its wildly successful Little Shop toy promotion and giving away plastic bags after Woolworths had banned them.

Management of Coles had repeatedly indicated that it was ethically uncomfortable with the company’s 3000-odd poker machine ownership spread among pubs and clubs, when it was owned by Wesfarmers.

Mr Cain was reluctant to agree with this notion, instead declining to repeat the same concerns and talking down the prospect of a sale in the short term.

If it did offload its pubs, it would likely be in a joint-venture structure.

Coles reported net half-year profit after tax of $381 million for the six months to December 31, down 29 per cent from the same period a year ago.

Its share price closed four per cent lower on Wednesday at $12.08.

Woolworths’ pubs and clubs have drawn the ire of NSW gaming regulator

Market competitor Woolworths has been embroiled in a scandal regarding its poker machine ownership recently.

The ABC reported that pubs owned by Australian Leisure and Hospitality (ALH), which is 75 per cent owned by the supermarket giant, are being investigated over claims staff illegally gave free drinks to pokies players to keep them gambling longer.

The NSW gaming regulator is investigating more than 50 venues according to the report.

Liquor and Gaming NSW has hold the ABC it has “issued coercive notices to obtain a significant volume of information and records, and formally interviewed current and former ALH staff and patrons.”

The investigation has been going for close to a year and has been described as “comprehensive” by a spokesman for the regulator.

It is a criminal offence in NSW to provide free or discount alcohol to induce gambling.

The Sydney Morning Herald reported in 2018 that Woolworths has long tried to distance itself from its growing pokie machine empire.

In its annual report – in 2017 a 128-page document full of photos of smiling families you won’t find mention of the words poker machine once.

A confidential report titled NSW Clubs Industry Insights and Tends drafted by industry consultants PKF for Clubs NSW describes a vast and growing gambling business.

The report charts the net profits of poker machines across Australia in pubs and clubs, revealing staggering profits per machine in NSW equating to $100,000 per machine per year, at an average of $272 per machine per day.

This translates to about $1.2 billion in net pokie revenue for Woolworths alone from its holdings across the country.

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