RNS Number:1225L
Coles Myer Ld
15 May 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

--------------------------------------------------------------------------------

15 May 2003

                     COLES MYER THIRD QUARTER SALES UP 5.9%

  * Q3 2003 sales up 5.9 % 1
  * Food & Liquor sales up 4.2%
  * Excellent progress on fuel offer
  * Kmart and Target turnaround continuing
  * Sales quality improving at MGB
  * Full year profit expected at upper end of guidance 2

Coles Myer Ltd (CML) today announced third quarter sales of $6.5 billion, an
increase of 5.9% for the 13 weeks ended 27 April, 2003 (Q2 2003: 4.1%).

CML CEO John Fletcher said: "This result demonstrates good progress against our
strategy in a highly competitive environment."


  * Food & Liquor sales increased by 4.2% over the third quarter, up from 3.4%
    in the previous quarter, despite the absence of a fuel discount offer.

  * Kmart and Officeworks combined sales rose by 16.7%, while Target sales
    were up by 13.4%. This is clear evidence that the distinct strategic
    positionings of these brands are delivering sustainable results.

  * While sales were down by 3.1% in Myer Grace Bros, their quality improved
    markedly, in line with the brand's ongoing rebuild strategy, underpinning a
    return to profitability this year.

"The result reflects a relentless focus on our customers - providing the best
service, the best ranges and the best prices every day," Mr Fletcher said.

Mr Fletcher said the Group's underlying net profit after tax for FY2003 was
expected to be at the upper end of $425-435 million2 earnings guidance provided
previously.

Food & Liquor

Chief Operating Officer Food and Liquor, Alan Williams, said Coles, Bi-Lo and
Liquorland were competing aggressively in all their markets, reflecting a
balanced and disciplined approach to business fundamentals.

"At the same time we are continuing to work on a range of new initiatives to
deliver ongoing benefits - an improved fresh offer, new advertising campaigns
for Coles and Bi-Lo and improvements to our check out and service standards.

"The new Bi-Lo marketing campaign, 'Why Pay More!', was launched on May 11,
reinforcing and strengthening our current customer offer, focussing on our low
prices, quality and value for money Bi-Lo branded products," Mr Williams said.

"The Coles campaign will be launched in the coming weeks.

"The supermarket store expansion program is continuing, with seven new stores
opening during the third quarter. A total of 45 openings are expected for
FY2003, ahead of our strategic plan of 30-35 new stores.

"Despite our strong competitive and value position, food sales continued to be
impacted by fuel discounts in the market, with higher oil prices during the
quarter having increased customer interest in such offers.

"We are making excellent progress in finalising a fuel offer for our customers,
thereby eliminating a significant point of difference with our major competitor.

"Liquorland opened 12 new stores in the quarter. The acquisition of Theo's
Liquor in NSW is expected to be finalised in late May, and will contribute a
further 48 stores and four hotels. This strategic and high margin business is
expected to be earnings per share positive in the first full year. Once
completion has taken place, details relating to the equity consideration of the
sale will be disclosed. Including Theo's, a total of 112 new locations are
expected for FY2003, being well ahead of our plan of 20-25 stores/hotels.

"We continue to expect mid single digit sales growth for the Food & Liquor
business for the full financial year," Mr Williams said.

Kmart & Officeworks sales momentum accelerated during the quarter, with combined
sales up 16.7% during the period (Q2 2003: 9.6%). Strong underlying growth was
boosted by a full quarter contribution from Viking, acquired by Officeworks on 3
January 2003.

Kmart Managing Director Hani Zayadi said: "The Kmart result reflects tangible
evidence of customers' acceptance of the brand's strategic direction, with a
strong focus on wanted ranges and great prices.

"A key customer deliverable for Kmart is seasonal and event dominance, and this
was evident in our strong Easter sales, supported by an effective marketing
campaign.

"All categories performed well over the quarter, highlighted by customers'
positive response to our autumn apparel range.

"Kmart sales growth is expected to moderate in the fourth quarter, however,
given the high prior year sales base (Q4 2002 : 13.9% Kmart and Officeworks
combined sales growth).

"We continue to expect a lower earnings contribution in the second half of the
year, in line with normal industry seasonal trends.

"Kmart opened one new store and one Garden Super Centre in the quarter,
totalling 8 new stores for the full year," Mr Zayadi said.

Officeworks delivered another strong performance. Officeworks Managing Director
Peter Scott said solid underlying sales growth was further strengthened by
Viking and the opening of two new stores. Viking performed in line with our
expectations during the quarter, with the business expected to exceed its cost
of capital in the first full year of operation. The Officeworks network
continues to expand, with a further five new locations to open in the fourth
quarter, bringing the total to 70 stores by the end of FY2003.

Myer Grace Bros and Megamart combined sales were 3.1% lower in Q3 this year over
last year.

"Our Q3 sales performance reflects a significant reduction in unprofitable
discount and promotional activities over the same period last year. While this
strategy resulted in lower sales volumes during the period, the quality of
sales, and therefore margins, improved considerably.

"We are continuing to improve our merchandise selections, our marketing is more
strategic, and our increased focus on planning has resulted in better execution
and higher stock turn," MGB Managing Director Dawn Robertson said.

"Our work to rebuild Myer Grace Bros is progressing to plan. We are seeing
encouraging improvements in our key businesses of womenswear, menswear,
cosmetics and soft home, reflecting our recently launched brand positioning.

"After a detailed review of our store portfolio and in line with our rebuild
strategy, we announced the closure of our Nowra and Tamworth stores during the
quarter.

"Also in line with strategy, we opened our eighth Megamart at Casula in Sydney,"
Ms Robertson said.

Target sales growth increased to 13.4% in the quarter as customers responded
positively to its 'great style, great value' offer and the early arrival of
winter merchandise.

"Our focus continues to remain on the timely delivery of on-trend, high quality
ranges and achieving rapid sell-through within each season. Further enhancements
to our buying team during the quarter have positioned us well to continue to
deliver," Target Managing Director Larry Davis said.

"The apparel and manchester categories continued their strong growth, and our
Easter confectionery results were particularly pleasing.

"New stores were opened during the quarter at Woodend (Victoria) and Wetherill
Park (NSW), and the Cowra Target Country store was re-branded to a full-line
Target store.

"The opportunity has also arisen to consolidate the Baby Target stores at
Glendale (NSW) and Werribee (Victoria) into neighbouring full-line Target
stores. As a result, these two stores will close in July 2003 and January 2004
respectively. The full-line Targets are in close proximity to the closing sites,
and will increase their range of baby product to continue to cater for local
customers.

"Similarly to Kmart, Target's sales growth is expected to moderate in the fourth
quarter, given the high prior year sales base (Q4 2002: 9.3% sales growth)," Mr
Davis said.

Sales in the Emerging Businesses division increased by 5.9% over the quarter.
While Coles Online and Liquorland Direct continued to grow strongly, Harris
Technology sales were temporarily impacted by a brief disruption in supply from
a major vendor, which has now been resolved.

Further enquiries:

Media          Scott Whiffin          03 9829 5548

Analysts       Amanda Fischer         03 9829 4521

Financial Analysis



                                                         Third Quarter                        Year to date

                                                          (13 weeks)                           (39 weeks)

            Business Group Sales                       2002        2003        Chg         2002         2003       Chg

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

Food & Liquor                                         3,978       4,146        4.2       11,859       12,441       4.9
Kmart & Officeworks                                     870       1,015       16.7        2,961        3,306      11.6
Myer Grace Bros & Megamart                              689         668      (3.1)        2,453        2,409     (1.8)
Target                                                  518         588       13.4        1,824        2,006      10.0
Emerging Businesses                                      56          59        5.9          141          173      22.8
Intra-group sales                                       (3)         (7)                    (10)         (21)
Total Sales                                           6,108       6,468        5.9       19,227       20,313       5.7
Comparable store sales
Food & Liquor                                                                  1.5                                 1.3
Kmart & Officeworks                                                            9.4                                 8.2
Myer Grace Bros & Megamart                                                   (4.3)                               (2.2)
Target                                                                        13.0                                10.2
Total Group                                                                    2.8                                 2.9
Exited businesses
Red Rooster                                              51           -                     166            -
Myer Direct                                               1           -                      40            -
Total exited businesses                                  52           -                     205            -






                      This information is provided by RNS
            The company news service from the London Stock Exchange
END

QRTNKPKQBBKKCPD