RNS Number:4914H
Coles Myer Ld
13 February 2003

Coles Myer Ltd.

ABN 11 004 089 936

800 Toorak Road, Tooronga, 3146

Telephone (03) 9829 3111

Facsimile (03) 9829 6787

Postal Address: PO Box 2000, Glen Iris, 3146

News Release

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Friday, 14 February 2003

COLES MYER FIRST HALF SALES UP 5.5%


  * Group sales up 5.5% (excluding Red Rooster and Myer Direct)

  * Full year profit guidance unchanged

  * Food & Liquor sales up 5.3%

  * Target and Kmart turnaround accelerating

  * Myer Grace Bros rebuild on track

  * Strong H1 earnings improvement

  * Double digit Food & Liquor earnings growth

  * EBIT margins up across Kmart/Officeworks, Target and MGB

Coles Myer Ltd (CML) today announced half year sales of $13.8 billion, an
increase of 5.5% for the 26 weeks ended 26 January, 2003. Second quarter sales
rose by 4.1% to $7.5 billion.

CML Chief Executive Officer, John Fletcher, said the Food & Liquor division had
delivered a sales increase of 5.3% over the half in an intensely competitive
environment.

Kmart and Officeworks combined sales rose by 9.5% over the half and Target sales
increased 8.6%.

"The turnaround at Kmart and Target has accelerated. The distinct strategic
positionings of these brands are beginning to deliver sustainable results," Mr
Fletcher said.

"Considering the state of these businesses only 18 months ago, this is a
fantastic outcome.

"EBIT margins expanded across the Food & Liquor Group, Kmart/Officeworks, Target
and MGB over the half year, despite a very competitive market.

"We reaffirm the earnings guidance given at the 2002 Annual General Meeting (net
profit after tax of $425-435 million, excluding (i) any one-off profit from the
potential sale of Sydney Central, and (ii) any potential one-off non-cash charge
from an anticipated change in US accounting standards which may affect inventory
valuations).

"The impact of the reduction in shareholder discount rates remains within
expectations.

"For our Food & Liquor business, all of our analysis confirms the key point of
difference with our major competitor is a petrol offer. The effect of
intensified petrol discounting over the second quarter clearly impacted our
sales.

"Completion of a fuel offer is our highest priority. While we had hoped for an
announcement in December, this is a significant initiative and our objective
must be to ensure that we secure the best long term outcome for customers and
shareholders," Mr Fletcher said.

Food & Liquor


  * Sales growth of 5.3% for the half

  * Double-digit earnings growth, in line with strategy

  * Sales impacted by intensified fuel discounts

Chief Operating Officer Food and Liquor, Alan Williams said sales had grown by
5.3% for the half year and 3.4% in the second quarter. The group was on track to
deliver double-digit profit growth for the half, in line with strategy.

"Despite our strong competitive and value position, food sales have been
impacted by fuel discounts. In addition, price deflation has slowed sales in the
liquor market, and lower inflation has impacted other areas, particularly fresh
produce. However, our continuing focus on shrinkage, waste and other initiatives
has underpinned and enabled strong growth in our bottom line," Mr Williams said.

Mr Williams said that while completion of a fuel offer was the Company's highest
priority, the Food & Liquor Group was also focussed on a number of initiatives
designed to further improve the customer offer and back office efficiencies.
These include:


  * Improved fresh produce offer with better quality, merchandising and
    service standards

  * Reinforcement of our competitive price position

  * Expanding value for money house-brand range to meet demand

  * Consistently strong promotional offers

  * Competitive every day shelf pricing

  * Raised customer service standards - check-out efficiencies and greater
    visibility of store management

  * Revised marketing, including advertising and in-store treatment to promote
    the complete customer offer

  * Reduced product cost - GNX electronic purchasing

  * Continuing operational efficiencies

  * Improved shrinkage trends

  * Reduced store administrative expenses

  * Reduced fit-out costs

"The supermarket store expansion program is continuing, with 17 new stores
opened during the half, in addition to 6 acquisitions. A further 21 openings are
expected over the year.

"Liquorland opened 32 new stores and two hotels in the half, with a further 27
to open in the second. The Theo's Liquor acquisition in NSW will contribute a
further 47 stores and four hotels, expected in late March (subject to ACCC
approval).

"In the second half of FY2003, we expect sales growth to benefit from further
new store openings and contributions from Theo's Liquor," Mr Williams said.

Kmart & Officeworks again performed strongly, with combined sales up 9.5% over
the half and 9.6% in the second quarter on last year's high sales base.

"The Kmart result reflected growing customer acceptance of our strategic
direction, underpinned by our lowest price guarantee," Kmart MD Hani Zayadi
said.

"Customers are responding positively to our renewed focus on meeting their
needs, which sees us delivering in-store range enhancements, improved service,
wider aisles and faster checkouts.

"Our more effective marketing campaign, 'cutting the cost of living', has
achieved strong results. The focus on item and price is continuing and has been
well received.

"Sales in all apparel areas as well as entertainment and consumables were
particularly strong, with better in stock performance and merchandise offer.

"Kmart has opened three new stores and three Garden Super Centres in the past
six months, with a new Kmart store and Garden Super Centre scheduled to open in
the next quarter," Mr Zayadi said.

Officeworks delivered another strong performance. Officeworks MD Peter Scott
said the store rollout strategy was proceeding to plan, with 3 new locations
opened over the second quarter and a further 7 openings expected in the second
half. The Viking acquisition was settled on 3 January and is performing to plan.

Myer Grace Bros and Megamart combined sales were slightly lower over the half
(down 1.3%) and the second quarter (down 1.5%). This was in line with our
expectations, given the temporary closure of the Bondi store and shareholder
discount reduction.

"In a very competitive and promotional market, our first Christmas under the
turnaround strategy was satisfactory. Good customer traffic was experienced over
the holiday period, with customers responding to our strengthening brand
positioning and strategic marketing events," Myer Grace Bros MD Dawn Robertson
said.

"Further enhancements to branded product ranges in our key focus areas of
womenswear, menswear, cosmetics and home will continue through 2003, along with
ongoing improvements in service quality and in-store environments. Our new
marketing program launches this weekend, and our new private label brands,
'Basque' and 'Urbane', have already been well received by customers.

"Importantly, our bottom line is reflecting margin improvement, due to better
planning and execution resulting in higher stock turn.

"Megamart opened its Narre Warren store in Victoria during the second quarter to
a very positive response from customers," Ms Robertson said.

Target sales rose by 8.6% over the half and 6.3% in the second quarter, in line
with strategy as its recovery continues to build real momentum. The result is
particularly positive given the net reduction of two Target Country stores
during the half.

"Customers have responded very well to our exciting offer, particularly in
apparel, manchester, and toys," Target MD Larry Davis said.

"The success of the '100% Happy' marketing campaign has exceeded our
expectations. The program reached full swing in the second quarter, with
television, outdoor and magazine communications promoting our 'great style,
great value' offer.

"Our focus continues to remain on delivering on-trend, high quality ranges and
achieving rapid sell-through within each season.

"The combination of merchandising improvements, higher stock turns and
operational efficiencies have delivered fuller margins over the half," Mr Davis
said.

Emerging Businesses

Sales in the Emerging Businesses division increased by 23.9% over the quarter,
led by strong growth in Harris Technology. Following our agreement with
Australia Post to provide pick, pack and delivery services, we have recently
strengthened our marketing of Coles Online, and now also offer a wider range of
credit card payment options for purchases.

Further enquiries:

Media        Scott Whiffin      03 9829 5548

Analysts     Amanda Fischer     03 9829 4521



Financial Analysis
                                                  Second Quarter                          First Half

                                                    (13 weeks)                            (26 weeks)

         Business Group Sales                  2002         2003        Chg         2002         2003          Chg

    (ex Red Rooster, Myer Direct)                $m           $m          %           $m           $m            %

Food & Liquor                                 4,139        4,280        3.4        7,881        8,295          5.3
Kmart & Officeworks                           1,226        1,344        9.6        2,091        2,291          9.5
Myer Grace Bros & Megamart                    1,064        1,048      (1.5)        1,764        1,741        (1.3)
Target                                          775          823        6.3        1,305        1,418          8.6
Emerging Businesses                              42           52       23.9           85          114         33.9
Intra-group sales                               (3)          (7)                     (7)         (15)
Total Sales                                   7,243        7,541        4.1       13,119       13,845          5.5
Comparable Store Sales                                                  1.8                                    2.9
Exited businesses
Red Rooster                                      59            -                     114            -
Myer Direct                                      26            -                      39            -
Total exited businesses                          85            -                     153            -



                      This information is provided by RNS
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