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'Coles Group Limited' (formerly 'Coles Myer Limited') is an Australian public company which operates numerous retail chains. It is Australia's second largest retailer, behind Woolworths Limited.

Contents

History

Myer

Coles

Merger of GJ Coles and Myer

After the Merger

Sale of Myer

Sale of Coles Group

Businesses

Everyday Needs Businesses

Other brands

References

External links

History

Myer

Sidney Myer arrived in Melbourne in 1899 as a penniless immigrant, working briefly at a drapery store before moving to Bendigo where he and his brother opened the first Myer 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. (Myer is now owned by Newbridge Company. It was bought from Coles Myer in 2006 causing the name change to Coles Group.)

Coles

Separately, 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.
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.^[1]
In 1960, the first supermarket was opened in Melbourne suburb, 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 (Coles) 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.
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 FAL and became Action Supermarkets.

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 a chain of mid-market department stores, 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 (earlier "Coles Fosseys") merged and the first Baby Target speciality store was opened, followed in 1998 by Target Home. In 1989, 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, 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 divest the struggling chain. Six of the nine strores were sold to competitor 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.
Fletcher also engineered the acquisition of the Australian retail fuel operations of Shell, with the fuel outlets rebranded 'Coles Express', allowing Coles Group to counter the success of Woolworths' discount petrol operation. Woolworths subsequently gained entry to part of the Caltex network to provide a recognised brand for its fuel offer.

Sale of Myer

In August 2005, Coles Myer called for expressions of interest in purchasing the perennially under-performing Myer department store business. There was significant interest from both Australian and overseas investors, including the Myer family. On 13th 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 believing that such a significant change to the flagship supermarkets business would be too risky and cause an eventual decline in market share. (The plan was eventually put on hold in March 2007 due to the proposed sale of Coles Group.) ^[2]
In August 2006, Coles announced that a group of private equity companies led by Kohlberg Kravis Roberts & Co. (KKR) 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. ^[3]
In November 2006, long-term senior supermarkets executive Peter Scott was dismissed for an unspecified breach of the company's code of conduct.^[4]
On 23rd 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 a restructuring such as a demerger.
.^[5] On 20th 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 23rd March, Coles Group stated it planned to sell its businesses as either an entire package, or in three parts (Officeworks, Target and the remaining businesses Kmart, Coles, Bi-Lo, and liquor shops). ^[6]
On 3rd of April, Solomon Lew, the former chairman and long-time antagonist of the current board & 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. ^[7]
In May 2007, Coles reported its slowest sales growth in at least seven years with continuing poor performance from Coles Supermarkets and Kmart.^[8]
On 2 July 2007, Wesfarmers announced it intended to buy Coles Group for $22 billion, the largest take-over bid in Australia. The sale is expected to be completed in October 2007. ^[9]
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 (including a combined Bunnings/Officeworks "big box" retailing division), the possible sale of Kmart, and the exit of Coles Group from its head office base at Tooronga. ^[10]

Businesses

Everyday Needs Businesses

The Everyday Needs businesses encompass retail outlets that are frequently shopped at by customers including supermarkets, liquor and general merchandise.

★ Coles Supermarkets: the second largest supermarket chain in Australia.

★ BI-LO: a budget supermarket chain. Until 2001, Bi-Lo traded as Newmart in Western Australia. In August 2006 Coles Group began to re-brand BI-LO stores as Coles Supermarket or divested them, but this activity was placed on hold in 2007 pending the sale of Coles Group.

★ Liquorland: Liquor chain, with some outlets attached to Coles or Bi-Lo Supermarkets, but run separately. Also operates some hotels via subsidiary.

★ Vintage Cellars: Liquor chain with an orientation towards fine wines

★ 1st Choice Liquor: Liquor chain comprising larger stores which compete more directly with Woolworths brands such as Dan Murphy's

★ Pick 'n Pay Hypermarket: two "hypermarkets" located in suburbs of Brisbane.

★ Kmart: chain of discount department stores, originally 51% owned by the US S.S. Kresge Company (later Kmart Corporation), but bought out by Coles Myer in 1994. Kmart also operates the automotive servicing brand Kmart Tyre and Auto. Until 2006, Kmart also operated a Garden Super centre brand. In August 2006 Coles Group announced that Kmart would be replaced by the Coles brand, but this plan was deferred in March 2007 pending the sale of Coles Group.

★ Coles Express: re branded Shell service stations offering convenience stores and fuel products. Before Coles Myer Ltd took over Shell service stations, Coles Express was the name used for smaller, inner-urban Coles supermarkets which are now known as Coles Central.

★ Kmart Tyre and Auto: car servicing outlets. All Shell Autoserv outlets attached to Shell petrol stations were bought by the Kmart Tyre and Auto business in early 2006.

Other brands

★ Officeworks: Large office supplies network, stocking stationery, office and school supplies, computer hardware and software, and office furniture.

★ Harris Technology: Computer hardware and software reseller with strong online presence, oriented towards corporate customers.

★ Target: chain of discount department stores whose name and logo was originally purchased from Target Corporation by Myer Emporium Limited in 1968. Target Australia is otherwise not related to Target Corporation. Operates in some regional areas as "Target Country", smaller stores which were previously branded "Fosseys".

★ Pharmacy Direct: Pharmacy products predominantly ordered online, via mail, or phone in Australia. With current Australian legislation preventing chains from operating pharmacies within supermarkets, Coles acquired Pharmacy Direct in 2007 to establish a presence in this market.

★ Coles Group is a partner with National Australia Bank in Loyalty Pacific, which operates the FlyBuys loyalty program.

★ Coles SuperCentres were planned to open from September 2007, with many sourced from either existing Pick 'n Pay Hypermarkets or former 'Super K' stores, which were divided in the 1990s into separate Coles and Kmart stores. However these plans were put on hold in March 2007 pending the sale of Coles Group.^[2] Then in August 2007, Wesfarmers CEO Richard Goyder said super centres would almost certainly not be part of the Wesfarmers approach after taking over Coles Group. ^[12]
Coles Group Limited is listed on the Australian Stock 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 (de-listed 6 January 2006), the New Zealand Stock Exchange (de-listed 1989) and The London Stock Exchange (De listed ??).

References

1. Mixed legacy of Coles' new world
2. Coles defers supercentre strategy as sell-off looms
3. Inside Business - Peter Morgan on Coles Myer's rejection of takeover bid
4. Coles sacks supermarkets executive over supplier deals
5. Press Release - Coles Group Market Update
6. Break-up tipped to start next week as Coles prepares for billion sale
7. Break-up tipped to start next week as Coles prepares for billion sale
8. Coles Group sales growth reaches 7-year low
9. Coles sold for billion
10. Wesfarmers plans Coles investment, restructuring
11. Coles defers supercentre strategy as sell-off looms
12.

External links

★ Coles Group website