Coles Group


Coles Group Limited is an Australian public company operating several retail chains. Its chief operations are primarily concerned with the sale of food and groceries through its flagship supermarket chain Coles, and the sale of liquor and petrol through its Coles Liquor and Coles Express outlets. Since its foundation in Collingwood, Victoria in 1914, Coles has grown to become the second-largest retailer in Australia after its principal rival Woolworths in terms of revenue.
Formerly known as Coles Myer Ltd. from 1985 to 2006, Coles Group was owned by Western Australian conglomerate Wesfarmers from 2007 until 2018, when it was spun-off, with it once again listed as an independent public company on the Australian Stock Exchange, containing Coles Supermarkets, Coles Online, Coles Express, Coles' liquor division, Coles' financial division and a half-share in FlyBuys, with former assets Kmart, Target and Officeworks remaining subsidiaries of Wesfarmers.

History

Coles

In 1914, the first Coles "variety store" was opened in Melbourne. Coles was founded in 1914 by George Coles when he opened what was called the "Coles Variety Store" in Smith Street in the Melbourne suburb of Collingwood. More stores opened and the chain was regarded as the leaders in providing value to Australian shoppers. The building formerly occupied by the original Coles Variety Store is now the location of a Woolworths outlet – the major competitor to Coles.
Coles was run in succession by members of the Coles family from 1914 until the mid-1970s by the "famous five knights", brothers Sir George, Sir Arthur, Sir Edgar, Sir Kenneth and Sir Norman – known by their first initials – GJ, AW, EB, KF, NC.
In 1960, the first supermarket was opened in the Melbourne suburb of North Balwyn and in 1973, a Coles store had been established in all capital cities of the country.
Kmart Australia Limited was born out of a joint venture between G.J Coles & Coy and Kmart Corporation in the US. The first store opened in the Melbourne suburb of Burwood in 1969.
In 1978 Coles acquired full ownership of the Australian K-Mart operation and in 1994 bought back all shares Kmart Corporation held in Coles Myer.
A long-term licensing agreement allows Coles Group to use the Kmart name. Kmart New Zealand shares merchandise and branding with Kmart Australia, and is owned by Coles Group Holdings New Zealand.
In Australia, BI-LO was established by John Weekes in Adelaide during the late 1970s. It is a major supermarket chain owned and operated by retail giant Coles Group in parallel to Coles Supermarkets. It has more than 200 stores in Australia.
A new head office opened in 1987 at Hawthorn East, Melbourne. As of 2008, it remained the head office for Coles Supermarkets and associated subsidiaries.
In 1996, BI-LO acquired the six-store Newmart discount supermarket chain in Western Australia which then became the equivalent to BI-LO in Western Australia. By August 2002, it grew to 16 stores before being transferred to the management and being re branded as Coles, though some stores were sold off to Foodland Associated Limited and became Action Supermarkets.
Coles Group Limited was listed on the Australian Securities Exchange with the code CGJ, which references back to its first ever registered company name of G.J. Coles & Coy Proprietary Limited. The company has in the past been listed on the NYSE, the New Zealand Stock Exchange and the London Stock Exchange.

Myer

arrived in Melbourne in 1899, working briefly at a drapery store before moving to Bendigo where he and his partner, Jacob Slonim, opened the first store in 1900. A second store opened in 1908. In 1911 Myer bought a drapery store in Bourke Street, Melbourne, which later became the flagship Myer store, the Myer Emporium. Myer expanded to Adelaide, acquiring a shareholding in Marshall's department store in 1925, later renaming this company as Myer SA Stores Ltd. Expansion across Australia followed.

Merger of GJ Coles and Myer

Both chains grew throughout Australia through growth and acquisitions, and both independently listed on the Australian Stock Exchange.
By the 1980s, Coles primarily operated supermarkets, whilst Myer operated the department store chains Myer and Grace Bros, as well as the Target discount variety store chain in Australia. In August 1985, the Myer Emporium Ltd and GJ Coles & Coy Ltd merged, becoming the largest ever Australian Corporation. The official name change to "Coles Myer Limited" followed in January 1986.

After the merger

The office stationery chain Officeworks, based on the US chain Office Depot, was established in 1993 with the first store opening in the Melbourne suburb of Richmond in June 1994. This represented a successful introduction of a "category killer" – by comparison, around the same time Coles unsuccessfully attempted to negate the arrival of Toys "R" Us with the short-lived chain World 4 Kids.
In 1996, the operations of Target and Fosseys merged and the first Baby Target speciality store was opened, followed in 1998 by Target Home. In 1999, regional Fosseys stores were re-badged as Target Country, with metropolitan stores closed. Following Target's operating loss of $43m in 2001, the chain's format was repositioned to compete less with Kmart, Woolworths Limited's Big W, Harris Scarfe and The Warehouse, and more with Myer, with a focus on "middle class" quality products, especially clothing and home wares.
In 1998, Coles Myer opened the first Megamart store, in Coorparoo, Queensland. Harris Technology, a computer hardware and software reseller started by Ron Harris in 1986, was acquired in 1999.
By 2001, Coles Myer planned to expand the Megamart chain of furniture and electrical stores, but by 2005 had decided to divest the struggling chain. Six of the nine stores were sold to competitors Harvey Norman, with the remainder closed.
In 2001, the Company appointed John Fletcher, formerly of Brambles, as chief executive. Fletcher engineered a brief turnaround in the company's fortunes. Fletcher abolished the shareholder discount card, on the basis that it had eroded margins while providing little benefit, and was unpopular with institutional investors. Since their introduction in the early 1990s, the card had induced a tenfold increase in the number of Coles Myer's shareholders, with the overwhelming majority owning only small parcels of shares.
Fletcher also engineered the acquisition of the retail fuel operations of Shell Australia with the fuel outlets rebranded as Coles Express, allowing Coles Group to counter the success of Woolworths' discount petrol operation. Woolworths subsequently gained entry to part of Caltex Australia's network to provide a recognised brand for its fuel offer.

Sale of Myer

In August 2005, Coles Myer called for expressions of interest in selling the perennially underperforming Myer department stores. There was significant interest from both Australian and overseas investors, including the Myer family. On 13 March 2006, Coles Myer announced it would sell Myer to a consortium largely controlled by US private equity group Newbridge Capital, part of the Texas Pacific Group. The Myer family retained a 5% stake. Texas Pacific had interests in UK department store Debenhams and high-end US retailer Neiman Marcus. The sale was completed in June 2006.
With the sale of Myer, the parent company received shareholder approval to rename as Coles Group Ltd, effective 27 November 2006.

Sale of Coles Group

Coles Group planned to rebrand its assorted holdings under the Coles name, with plans to have all holdings other than Officeworks and Target rebranded by late 2007. This plan was not well received by investors, most of whom reportedly believed that such a significant change to the flagship supermarkets business would be too risky and cause an eventual decline in market share.
In August 2006, Coles announced that a group of private equity companies led by Kohlberg Kravis Roberts & Co. was looking to buy the company, with an initial proposal of $14.50 per share. The Coles board rejected the offer stating it significantly undervalued the company, and was conditional on a due diligence process, without a guarantee that the deal would go ahead. A second proposal of $15.25 per share in October 2006 was rejected for largely the same reasons.
In November 2006, long-term senior supermarkets executive Peter Scott was dismissed for an unspecified breach of the company's code of conduct.
On 23 February 2007, the company announced a downgrade of expected earnings and that it was considering ownership options, including the possibility of a full sale of the business or restructuring such as a demerger. On 20 March 2007, it deferred its plans to rebrand Kmart under the Coles banner and create supercentres, and subsequently paused its conversion of BI-LO stores to Coles Supermarkets given the lack of success of this move.
On 23 March, Coles Group stated it planned to sell its businesses as either an entire package, or in three parts.
On 3 April, Solomon Lew, the former chairman and long-time antagonist of the current board and management team, sold his 5.8% shareholding of the company. A large portion of these shares were bought by Wesfarmers, which was believed to be part of a consortium of bidders including Macquarie Bank, PEP and Permira. The share price at which the transaction took place was reportedly $16.47, then 2.2% above the market price. A bid for the entire company at this price would have valued Coles Group at A$19.7 billion, well above the two KKR proposals announced in 2006.
In May 2007, Coles reported its slowest sales growth in at least seven years with continuing poor performance from Coles Supermarkets and Kmart.
On 2 July 2007, Wesfarmers announced it intended to buy Coles Group for $22 billion, the largest take-over bid in Australia. The sale was expected to be completed in October 2007.
In August 2007, Wesfarmers foreshadowed its plans for the restructuring of Coles Group following its anticipated takeover, including investment of A$5 billion, establishing three separate divisions, the possible sale of Kmart, and the exit of Coles Group from its head office base at Tooronga.
The independent expert report published in October 2007, advising shareholders preparatory to the proposed sale was critical of the culture within Coles Group.
At a shareholder meeting in Melbourne on 7 November 2007, shareholders voted overwhelmingly with 99.25% approval of the sale of Coles Group to Wesfarmers. The Scheme of Arrangement between Coles Group and its shareholders was approved by the Supreme Court of Victoria on 9 November 2007, the last day Coles Group shares traded on the Australian Securities Exchange. The Scheme was implemented on 23 November 2007, ending Coles Group as a company with its subsidiaries merged into Wesfarmers' business structure.

Relisting

Coles Group Limited was spun-off from Wesfarmers on 21 November 2018, with the company once again listed as a public company on the Australian Stock Exchange under the trading code, debuting at A$12.49.
At the time of listing, the company included 806 Coles Supermarkets, 712 Coles Express outlets, 894 liquor stores including Liquorland, Vintage Cellars and First Choice Liquor, Coles-branded financial services and 88 Spirit Hotels, as well as joint-ownership of the FlyBuys loyalty program. Wesfarmers retained a 15 percent stake in Coles Group as well as full ownership of Kmart, Target and Officeworks, which were previously part of the former Coles Group incarnation.

Businesses