News: COL UPDATE 1-Australia's Coles Group's HY profit down 14 percent, convenience segment weighs

(Adds background, segment performance)

Feb 19 (Reuters) - Australia's second-biggest grocery chain, Coles Group Ltd (COL) , reported on Tuesday a 14 percent drop in half-year profit in its first results since being spun off from Wesfarmers Ltd (WES) last year.

Net profit for the six months ended Dec. 30 came in at A$738 million ($526.19 million), down from A$858 million a year earlier, because of a restructuring provision in supermarkets and weaker profit margins for its convenience business.

The company said last month it would record a one-time pre-tax item of A$146 million in its first-half results for costs related to distribution centres that will be closed for five years.

Coles' supermarket segment's comparable sales growth was 3 percent during the six-month period, compared with 0.9 percent last year, boosted by its "Little Shop" campaign.

The "Little Shop" campaign offered mini collectables of store products, which quickly became coveted possessions across Australia and were being sold at marked-up prices on online auction sites when stocks dried up.

The marketing coup prompted the recent launch of "Fresh Stikeez", miniature versions of vegetables.

The company's convenience business affected profit during the half-year as a 15.8 percent decline in fuel volumes and unfavourable weather weighed heavily.

Earlier this month, Coles effectively pulled the plug on its underperforming fuel business by renewing a deal with Viva Energy Group Ltd (VEA) , wherein it would no longer set fuel prices and instead receive a commission on fuel sales.

The Melbourne-based company has grappled with declining fuel sales at its petrol stations in recent years as well as a slump in profitability at convenience stores.

Years of low margins after billions of dollars of investment and ruthless supermarket competition prompted Wesfarmers to spin off Coles in late 2018, after more than 10 years of ownership.

Coles said total revenue for the half-year rose 2 percent to A$20.35 billion.

($1 = 1.4025 Australian dollars)

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Australia's Wesfarmers to spin off Coles as competition bites	

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