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Retailer Coles to link with Shell
By CNN's Geoff Hiscock, Asia Business Editor
SYDNEY, Australia (CNN) -- Retailer Coles Myer has struck an alliance with global oil company Shell to offer discount fuel to Coles customers at 584 service stations across Australia. The long-awaited move, unveiled by Coles Myer on Tuesday, is to counter rival grocer Woolworths, which already sells discount petrol to customers from 280 outlets. Coles Myer is Australia's biggest retailer, with annual sales of about A$26 billion ($17 billion) from its supermarkets, liquor outlets and department stores. Woolworths, which gets 85 percent of its revenue from its supermarkets, runs a close second with sales of about A$25 billion. However, Woolworths has been more profitable than the troubled Coles Myer group, which was destabilized by a boardroom split for much of 2002. Woolworths is aiming for a full-year net profit of A$631 million to A$647 million this year, compared with Coles Myer's full-year target of A$425 million to $435 million. Coles Myer said Tuesday it would begin its alliance with Shell at 150 sites in Victoria state from July. Assuming a successful Victorian rollout, it expected to extend the tieup across Australia by mid-2004. Under the deal, a Coles Myer subsidiary will become the operator of Shell's core retail property network of 584 service stations. It will buy the rights to operate the sites from Shell multi-site franchisees for less than A$100 million ($66 million). The sites will be branded both as Shell and Coles Express. Coles Myer CEO John Fletcher said customers who buy over a certain amount at Coles, Bi-Lo and Liquorland outlets will get a fuel discount from the Shell service stations. Woolworths now offers a fuel discount of 4 cents a liter for customers who present a docket showing they have spent at least A$30 at a Woolworths store. The offer has added significantly to Woolworths' sales. Fletcher said the Shell alliance would add more than A$3 billion a year to Coles Myer revenue when fully rolled out. It would add to earnings per share in the 2004 financial year. Under the deal, which requires approval of competition watchdog, the Australian Competition and Consumer Commission, Shell will be the exclusive fuel supplier and provide the service station property. Coles Myer will set the fuel prices at each of the service stations it operates. Another Australian grocery chain, Metcash Trading, also plans to offer discount fuel to boost sales. Shares in Coles Myer are 2.28 percent higher at A$6.73 near the close Tuesday, on a day the broader market is about half a percent lower. Rival Woolworths is down 1.3 percent to A$12.97. But it is up 13.7 percent for the year so far, compared with a gain of 6.5 percent for Coles Myer.
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