Australia's Coles Sets Sale Details, Posts Rise in First-Half Profit

Australian retailer Coles Group said on Monday it is considering all options for a A$20 billion (US$16 billion) sale of the company, as it reported a slight rise in first-half profit.

Coles said it would consider bids for all of the group, or separate bids for each of its Officeworks business supplies chain and discount retailer Target.

Other options under consideration are a potential demerger of Target and Officeworks and the sale of a major stake in its Everyday Needs business, which comprises its supermarkets, liquor stores and discounter Kmart, while keeping it as a listed company.

"We intend to leave no stone unturned in looking at all options that could be in the interests of our shareholders," said Chairman Rick Allert.

In an apparent concession to a six-party consortium led by private equity firm Kohlberg Kravis Roberts that is sizing up a bid for the retailer, Coles said it would limit bidding syndicates to six in number -- above the limit of four it was initially considering.

Net profit for the six months to Jan. 28 rose to A$501.3 million from A$484.5 million, in line with the retailer's forecast of a A$501 million profit. That was above market expectations of A$490 million, according to a Reuters survey of five analysts.

Coles said its forecasts for profit this year and next were unchanged from February, when it cut the 2008 net profit forecast by 10% and first said it was considering a sale.

In the first half, food and liquor sales from continuing businesses rose 2.4%, below the rate of inflation and well below the approximately 6% growth of larger rival Woolworths.

Coles also said on Monday the rebranding of Bi-Lo stores to Coles had not achieved the expected improvement in sales, and the rebadging plan has been put on hold.

Same-store sales at the struggling Kmart chain fell 4.2% in the first half and margins shrank, while same store sales at Target rose 2.8% and Officeworks declined 3.1%.

Coles shares have jumped 10.3% since the company announced it was putting itself up for sale on Feb. 23.