SYDNEY, AAP – Supermarket giant Coles has posted a 2.0 per cent drop in half year profit to $549 million, hit by higher costs due to the COVID-19 disruptions, and expenses of its transformation projects.

Sales for the 27-week period to January 2 rose 1.0 per cent to $20.79 billion. Comparable sales also rose 1.0 per cent during the year.

Supermarket sales were up 1.1 per cent to $18.02 billion, while liquor sales rose 2.7 per cent to $2.0 billion. Online sales surged 46 per cent to $1.5 billion.

However, sales at its convenience store format Coles Express slid 8.5 per cent to $578 million following mobility restrictions due to lockdowns in the eastern states.

The Group said earnings were hit by $150 million of COVID-related costs incurred during the half year, an increase of $45 million from a year ago.

It also invested $20 million in relation to the Witron and Ocado transformation projects, while net costs increased by $13 million as a result of lower earnings from property operations, higher insurance costs and an increased net loss from Coles’ 50 per cent share of Flybuys.

Meanwhile, trading has been mixed in the current quarter, Coles said.

Supermarkets sales were elevated in early January due to the spread of the Omicron variant, before moderating later in the month. There has also been significant variation in sales between states, with COVID-19 and floods in South Australia impacting sales, particularly in Western Australia.

The company said it has already incurred COVID-19 costs of $30 million in January, although this has moderated in February.

Coles has kept its fully-franked interim dividend at 33 cents per share, similar to the level a year earlier.