Highlights

  • FY2025 sales increased as supermarket operations continued driving group performance.
  • Online grocery and automation investments supported operating efficiency improvements.
  • Fully franked dividends remained a key shareholder attraction.
  • Liquor operations continued facing weaker consumer demand during FY2026.

Coles Group Limited (ASX: COL) entered FY2026 with steady earnings growth from its core supermarket business, supported by resilient grocery demand and ongoing investment in automation. While supermarket operations continued delivering higher sales and improved profitability, softer liquor trading and cost pressures remained challenges. Investors are now watching whether Coles can sustain earnings momentum while maintaining its long-standing dividend profile.

For FY2025, Coles reported group sales revenue of approximately AUD 44.3 billion, representing growth of 3.6% over the previous year. Underlying EBITDA also increased as cost-saving initiatives and supermarket sales supported earnings. Although statutory profit declined compared with the prior year, the comparison was influenced by the additional trading week included in FY2024.

The supermarket division remained the primary growth engine. Sales continued increasing across both physical stores and online channels, while operating margins improved through ongoing productivity initiatives. eCommerce also delivered another year of solid expansion as more customers used digital shopping services and click-and-collect options.

Performance remained mixed across business segments during FY2026. Supermarkets recorded further revenue and earnings growth during the first half, whereas the liquor division experienced weaker sales as discretionary consumer spending softened. Management indicated that challenging market conditions within liquor could continue in the near term.

Automation remains one of Coles' major long-term investment priorities. The company has continued expanding automated distribution centres and online fulfilment facilities to improve inventory management, reduce operating costs and support future online growth. These projects are expected to strengthen supply chain efficiency over time, although they require significant capital investment during the rollout phase.

Cost management has also remained a key focus. Through its ongoing efficiency programs, Coles has continued identifying operational savings that can be reinvested into pricing, customer service and digital capabilities. Combined with the Flybuys loyalty program and private-label product range, these initiatives support customer retention in an increasingly competitive grocery market.

Coles also continues to appeal to income-focused shareholders through its fully franked dividends. For FY2025, the company declared total dividends of 69 cents per share before increasing its FY2026 interim dividend to 41 cents per share. While the dividend remains well supported by earnings, future distributions will continue to depend on profitability, capital expenditure requirements and board approval.

What Investors May Watch

Investors may monitor supermarket sales growth, online shopping momentum, automation projects, operating margins, cost-saving initiatives, liquor performance and future dividend announcements.

Risks

Key risks include increased supermarket competition, cost inflation, wage pressures, regulatory developments, slower consumer spending and execution risks associated with large automation projects.