Sydney — On Thursday, Australian retailer Coles Group reported a jump in online sales and a special dividend that cheered investors, sending its shares near their biggest one-day gain in two months.

The century-old retailer, which has battled bigger rival Woolworths in the bricks-and-mortar space for years, is investing heavily in expanding its online business to fend off online competitors such as e-commerce giant Amazon.

Those efforts have paid off with the online division reporting its first profit in 20 years, with sales up 30% and boosting overall turnover to A$38.46bn ($26.06bn).

Coles declared a final dividend of 24c a share and a special dividend of 11.5c a share, its first dividend as a public company. Its shares were up 4.2% at A$13.80, on track for their best single-day performance since June 19.

“The special dividend is the sweetener and investors would be buying into it right now just to get exposure to it,” said CPS Capital associate director Dale Raynes. “The online sales were a bit of surprise. It’s not an area where they specialise and I think they are starting to make that work, which they obviously need to.” 

Net profit was A$1.43bn for the year to June 30, down from A$1.58bn in 2018, hit by costs related to its separation from parent Wesfarmers late in 2018.

Coles warned that sales in 2020 could be hurt as its “Little Shop” promotional programme faces more competition. Coles refreshed the successful 2018 campaign in 2019 by offering collectible miniatures of fruits and vegetables with purchases of more than A$30.

“Cycling the comparable sales growth from last year’s Little Shop campaign will be challenging given competitor activity in market,” Coles said in a statement.

Coles and Woolworths have been locked in a discount war for several years and have come up with innovative promotional campaigns to grab customers.

The company’s sales from its supermarkets division rose 3.2% in the year, while gross margin improved by 20 basis points. On a comparable basis, sales grew 2.7% as inflation rose due to severe drought conditions in Australia.