Coles has stripped bonuses from senior managers and executives after the supermarket's earnings fell for the first time in a decade.
The supermarket on Thursday said earnings for the 2017 financial year fell 13 per cent to $1.6 billion as it spent more than $200 million cutting prices to compete with a resurgent Woolworths and Aldi's encroachment beyond the east coast.
And on Friday senior staff wore the cost, when Coles announced they would not receive their short-term incentive bonuses after the weak performance.
"Short-term incentive payments at Coles, which are available to a limited number of team members, are linked to annual earnings performance," a Coles spokesman said.
"As a result no annual [short-term incentives] were paid for the past financial year for those eligible employees."
It is understood that less than 5 per cent of Coles' 102,000 employees were eligible for the bonuses, while many of those will be in the running for other incentives.
Workers will have to wait until later in the year - when Wesfarmers releases its annual report - to learn if Coles managing director John Durkan will also lose his bonus.
Last year Mr Durkan received a $1.25 million cash bonus and $406,851 worth of shares under his short-term incentives scheme, which was 75 per cent of the maximum available, boosting his total remuneration to $5.2 million.
The loss of bonuses will do nothing to improve staff morale at Coles, which has hit its lowest level in seven years according to a recent UBS supplier survey.
Coles' same-store sales growth for the financial year slowed from 4.1 per cent last financial year to 1 per cent, and total revenue was flat from 2016, but Mr Durkan said on Thursday he "expected probably a worse set of sales numbers" given the challenging environment.
Parent company Wesfarmers was rescued by Bunnings, where earnings in Australia jumped 10 per cent to $1.3 billion, and a surge in the coal price, which led to earnings from its resources division swing from a $310 million loss to a $405 million profit. The conglomerate recorded a 27 per cent jump in net profit to $2.87 billion.
Morgan Stanley analyst Tom Kierath said he expected Coles' earnings to continue to fall, with price-cutting reducing its profit margin to below 4 per cent and more cuts on the horizon.
"Coles maintains that it has 'done enough on price,' but also that sales growth won't improve until 2018," Mr Kierath said.
Despite that, Morgan Stanley increased its estimate for earnings per share by 3 to 4 per cent based on the stronger coal performance and better earnings from Bunnings, Kmart and Target.
Questions continued to mount on Friday over Bunnings' ambitious expansion into the United Kingdom and Ireland, where it last year bought the Homebase chain and is attempting to roll its 251 stores over to the Bunnings brand.
Bunnings United Kingdom and Ireland (BUKI) racked up a $89 million loss in the 2017 financial year, more than many analysts expected, and Wesfarmers management warned it would not be profitable for some time.
"Around 12 months ago we likened the purchase of BUKI to the investment by Woolworths into Masters, which cost Woolworths nearly $4 billion," Bank of America Merrill Lynch analyst David Errington said. "To date, there is nothing that we have seen that causes us to change our view."
Bunnings said losses in BUKI were because of changes in Homebase's product range and moving it from a "promotional" strategy in which discounts were used to attract shoppers to an "everyday low price" format.
That ploy was risky because most retailers there used a discounting strategy and that was what shoppers were used to, meaning Bunnings could lose sales by being undercut on price, said Mr Errington, who forecast BUKI's losses to blow out to $200 million by 2020.
