Coles convenience earnings dive after Viva deal
The AFR reported that analysts have cut profit forecasts for Coles by as much as 10% after the recently floated retailer signed a new fuel supply agreement with Viva Energy which will decimate earnings from petrol and force Coles to ramp up convenience-store sales. Coles expects earnings from its convenience division to fall to $50 million this year because of falling fuel volumes – compared with $190 million in 2017 and $133 million in 2018 – and managing director Steven Cain warned the business would barely break even in future if fuel volumes did not improve. Under the 10-year agreement, which was finalised on Wednesday after two years of talks and trials, Viva will set the retail price of fuel, collect the full retail margin and receive higher royalties on Coles Express convenience store sales. Viva will pay Coles $137 million in compensation next month – equivalent to Coles Express 2018 earnings – to reflect the value transfer.