Highlights

  • Coles Group rarely commands the attention of the market's growth darlings, yet the supermarket giant's FY26 result, released on 25 August 2026, reinforced why it remains a core defensive holding for many Australian portfolios.
  • Total Revenue from ordinary activities rose 2.8% to AAUD 45,722mn.
  • Online continued to be a bright spot, with online supermarket sales up 5.6% and reaching 13.6% penetration of total supermarket sales.
  • Fully franked dividends are a meaningful draw for Australian investors, particularly those in retirement phase who value the franking credits.
  • Management struck a confident tone on the outlook, saying the company is entering FY27 in a strong position with its supermarket Business continuing to gain market share.

Coles delivered a solid FY26 result with double-digit growth in underlying profit, a 13% lift to its dividend and improving supermarket margins, quietly making the case that a defensive grocery grower can still shine even as flashier growth names dominate the headlines.

The quiet achiever

Coles Group rarely commands the attention of the market's growth darlings, yet the supermarket giant's FY26 result, released on 25 August 2026, reinforced why it remains a core defensive holding for many Australian portfolios. The shares responded positively, rising more than 2% on the day as investors digested a result that beat on the profit line and came with an upbeat early read on the new financial year. The board lifted the annual dividend by 13%, a tangible signal of management confidence.

The appeal of Coles has always rested on the non-discretionary nature of groceries. People buy food and household staples regardless of the economic cycle, which gives the business unusually stable and predictable cash flows. In an environment where interest rates have stayed higher for longer and consumers remain value-conscious, that defensiveness, paired with genuine Earnings growth, is precisely the combination that can quietly outperform when riskier names wobble.

The FY26 numbers

Total revenue from ordinary activities rose 2.8% to AAUD 45,722mn. Group earnings before interest and tax, excluding significant items, climbed 9.9% to AAUD 2,322mn, while net profit after tax excluding significant items jumped 13.7% to AAUD 1,255mn. On a statutory basis, reported EBIT was broadly flat at AAUD 2,087mn and reported NPAT rose 1.0% to AAUD 1,090mn, the gap between the two measures reflecting significant items booked during the year.

The supermarkets division did the heavy lifting. Segment revenue grew 3.7% to AAUD 41.5bn, and, critically, supermarket EBIT rose 12.2% to AAUD 2.37bn. Excluding the structural decline in tobacco, supermarket sales grew a healthier 5.1%, and gross profit Margin improved 37 basis points to 27.8%, helped by lower tobacco sales and the productivity benefits flowing from Coles's new automated distribution centres. Net tangible assets per share improved to AAUD 1.28 from AAUD 1.16.

Online continued to be a bright spot, with online supermarket sales up 5.6% and reaching 13.6% penetration of total supermarket sales. The one blemish was liquor: revenue fell 3.3% to AAUD 3.5bn and divisional EBIT slumped 47.8% to AAUD 59mn, a clear soft patch as discretionary spending on alcohol remained under pressure.

Dividends and Capital returns

Income investors were well served. Coles declared a fully franked final dividend of 37.0 cents per share, taking the full-year payout to 78.0 cents, up 13% from 69.0 cents in FY25. The final dividend carries a Record Date of 4 September 2026 and a payment date of 22 September 2026.

Fully franked dividends are a meaningful draw for Australian investors, particularly those in retirement phase who value the franking credits. A growing, fully franked payout backed by reliable grocery cash flows is central to the defensive-income thesis for Coles, and the size of the increase suggests management is comfortable with the durability of earnings heading into FY27.

Momentum into FY27

Management struck a confident tone on the outlook, saying the company is entering FY27 in a strong position with its supermarket business continuing to gain market share. Encouragingly, sales in the first eight weeks of FY27 matched the pace of the fourth quarter of FY26, and the liquor sales trajectory was reported to be strengthening, with the convenience portfolio delivering positive growth. Early momentum of that kind is important reassurance that the supermarket engine is not slowing.

The productivity story is a key structural driver. Coles has been investing heavily in automated distribution centres and supply-chain modernisation, and the FY26 margin improvement suggests those investments are beginning to pay off. As the automation ramps up, there is scope for further efficiency gains, though the benefits need to be weighed against ongoing cost pressures. Media reports around the result also flagged that Job cuts may accompany the efficiency push, a reminder that margin gains often come with operational change.

The macro backdrop is also working in Coles's favour in a subtle way. With interest rates staying higher than many households would like and cost-of-living pressures still front of mind, shoppers have been trading down to home brands and hunting for value, playing to the strength of Coles's own-brand range, where exclusive-to-Coles sales rose 6.1%. A cautious consumer tends to eat at home more and spend less on discretionary treats, which channels grocery dollars back through the supermarket tills that generate the bulk of group profit.

Bull and bear

The bull case is that Coles offers a rare blend of defensiveness and growth. It sells non-discretionary essentials, is taking supermarket market share, is expanding margins through automation, is growing online, and pays a rising fully franked dividend. If rates stay higher and the broader consumer stays cautious, investors may increasingly favour exactly this kind of reliable, cash-generative business, allowing a stock that flies below the radar to quietly outperform.

The bear case centres on competition and cost. Coles operates in an intensely competitive grocery market alongside Woolworths, Aldi and a growing Amazon presence, and price-conscious shoppers limit its pricing power. The liquor division's sharp EBIT decline shows discretionary categories remain vulnerable, regulatory and political scrutiny of supermarket pricing persists, and the valuation already reflects the company's defensive quality, leaving limited room for disappointment.

None of this constitutes personal advice, but the FY26 result made a credible case that defensive growth need not be dull. With double-digit Underlying Profit growth, expanding supermarket margins and a 13% dividend increase, Coles demonstrated that a business selling everyday essentials can still deliver for shareholders, particularly in a market that may be underappreciating steady compounders.

What Could Come Next for Coles Group?

First-quarter FY27 sales momentum will be closely watched to confirm the strong early read holds, along with whether the automated distribution centres continue to drive supermarket margin expansion.

Keep an eye on the recovery in the loss-making liquor division, the competitive dynamics with Woolworths, Aldi and Amazon, any regulatory developments on supermarket pricing, and the balance between cost-out initiatives and the customer experience as the efficiency program deepens.