By Robb M. Stewart

MELBOURNE, Australia--Coles Ltd. (COL.AU) logged a dip in quarterly sales, dented by the shift to a new business arrangement with its retail-fuel supplier that offset steady growth in its core supermarkets and liquor businesses.

Sales totaled 8.88 billion Australian dollars (US$6.25 billion) in the 12 weeks through March 24, down 1.8% on sales of A$9.05 billion a year earlier. That was despite a 3.2% rise in supermarkets sales to A$7.27 billion and 4.3% growth in liquor sales to A$735 million.

Sales from Coles's "Express" division slumped 32% year-over-year to A$874 million.

Effective in March, Coles moved to a commission-agent model and fuel supplier Viva Energy Group (VEA.AU) took responsibility for setting the retail price of gasoline sold through the Coles chain. The retailer will no longer record fuel sales revenue in its quarterly updates.

Fuel volumes dropped 11% in the fiscal third quarter.

Coles, Australia's second-largest supermarket chain by market share behind Woolworths Ltd. (WOW.AU), was spun off late last year by conglomerate Wesfarmers Ltd. (WES.AU), becoming an independent company as competition in the supermarket industry continues to heat up with a push by the likes of German discount chain Aldi.

Late last month, Coles entered a technology partnership with the U.K.'s Ocado Group PLC (OCDO.LN) to develop the Australian retailer's online grocery business. The push is forecast by Coles to roughly double its current Australia-wide home-delivery capacity and boost its online profit margin.

On a comparable basis, Coles said its supermarkets sales were up 2.4% on-year, helped by a promotional campaign and the timing of New Year's Eve, a typically strong trading day that fell in the third quarter this fiscal year.

Write to Robb M. Stewart at robb.stewart@wsj.com

(END) Dow Jones Newswires

April 28, 2019 19:07 ET (23:07 GMT)

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