Coles Admits Disappointment with Supermarket Sales Amid Increased Competition
The Australian grocery giant faces pressure from rivals as shoppers seek lower prices and split their spending across more retailers.
Coles, Australia's second-largest supermarket chain, has acknowledged it is "not happy" with the performance of its physical grocery stores, reporting sales figures that fell short of expectations. This comes as the company faces intensified competition from rivals such as Woolworths and Aldi, leading to an earnings downgrade.
Chief executive Leah Weckert stated that while online sales growth was strong, the momentum in bricks-and-mortar sales is a concern. "We are continuing to see a really good level of customer count coming through the store, but we're seeing a lot more splitting of baskets," Weckert explained during a briefing on the company's first-quarter performance.
In the 13 weeks ending September 27, Coles reported a 2.2% rise in group sales to $11.2 billion. Supermarket sales specifically increased by 3.6% to $10.3 billion, excluding tobacco. However, these figures missed market consensus. Consequently, Coles shares fell by eight percent following the update.
RBC Capital Markets analyst Michael Toner described the update as "disappointing." The company has revised its outlook, now expecting supermarket interim earnings before interest and tax to be flat compared to the previous first half's $1.2 billion, a shift from the anticipated increase. This suggests that overall group first-half earnings could also be lower.
Coles is responding by implementing strategies to "sharpen our offer over the coming months" for consumers facing economic pressures from higher inflation, petrol prices, and interest rates. The company has relaunched its 'Everyday Value' program, which includes price cuts for at least six months under a new 'Lower Everyday Prices' initiative. "We know customers are under pressure and we are confident that we have a strong plan in place to build their trust over this period," Weckert said.
Supermarket price inflation at Coles stood at 1.1% in the quarter, down from 1.6% in the same period last year. The inflation was primarily driven by cost increases in dairy and meat, moderated by deflation in fresh produce and continued deflation in non-food categories.
Similar to its competitor Woolworths, which reported a 4.7% sales increase for the 14 weeks ending October 4, Coles noted that customers are highly engaged with grocery promotions. However, sales in Coles' liquor stores fell 1.3% to $831 million, with a shift towards smaller pack sizes and ready-to-drink alcohol products.
In the 2025-26 financial year, Woolworths achieved a net profit of $1.1 billion, an 18% increase, while Coles reported a flat net profit of $1.1 billion.