Key Highlights

• For the 13 weeks from 29 June to 27 September 2026, Coles reported group sales of A$11,209 million, up 2.2% on the same period a year earlier of the company's release published on 29 to 30 October 2026.

• Liquor sales fell 1.3% to A$831 million, although Coles said convenience formats showed improvement and liquor eCommerce sales grew almost 20%.

• The liquor network ended the quarter at 994 stores.

• Supermarkets comparable sales growth was 2.7%, down from 4.6% in the prior year's first quarter.

What did Coles (ASX:COL) Group's first-quarter update reveal about the Australian grocery market? It showed a supermarket Business still growing sales and online volumes, but at a slower pace, with management openly pointing to household budget pressure and heightened competitor promotions. Coles also guided that first-half Supermarkets Earnings will be broadly flat on last year, which reframes the story after a encouraging FY26.

What Coles reported for the quarter

For the 13 weeks from 29 June to 27 September 2026, Coles reported group sales of A$11,209 million, up 2.2% on the same period a year earlier of the company's release published on 29 to 30 October 2026. Supermarkets sales rose 3.6% to A$10,320 million. Liquor sales fell 1.3% to A$831 million, although Coles said convenience formats showed improvement and liquor eCommerce sales grew almost 20%. The liquor network ended the quarter at 994 stores.

Supermarkets comparable sales growth was 2.7%, down from 4.6% in the prior year's first quarter. Price Inflation was 1.1%. Sales density reached A$20,443 per square metre, up 2.2%, and Coles opened eight new supermarkets and completed seven renewals.

The "Other" segment, which reflects a fuel Supply agreement with Viva Energy that expires in November 2026, fell from A$156 million to A$58 million, which weighed on the group total.

What Coles does and how it earns

Coles is one of Australia's two dominant supermarket operators, alongside Woolworths, and also runs a liquor business with several store formats. Supermarkets generates the large majority of sales, so earnings are driven by volumes, the mix between fresh, packaged and private label products, and the cost of running stores, distribution centres and online fulfilment.

Private label matters here. Sales of Exclusive to Coles products grew 4.3% in the quarter, ahead of overall Supermarkets sales growth, and the premium Coles Finest range rose 13.3%. Own-brand products typically carry different margins to branded goods, though the company did not break out margins in the quarter update.

eCommerce is the other growth engine. Supermarkets online sales rose 22.9% to A$1,623 million, lifting penetration to 15.7% from 13.3%. The company also reported rising engagement with its Flybuys loyalty programme, with swipe rates up 110 basis points and points redemptions up 16%.

The FY26 backdrop

Coles reported full-year FY26 results on 25 August 2026, and said it entered FY27 with encouraging momentum and a encouraging balance sheet. Sales Revenue was A$45.58 billion, up 2.8%. Earnings before interest and tax excluding significant items were A$2,322 million, up 9.9%, and net profit after tax excluding significant items was A$1,255 million, up 13.7%. Statutory net profit was about A$1.09 billion, up 1.0%, according to an RTTNews report.

Supermarkets sales grew 3.7% and EBIT rose 12.2%, with the EBIT Margin expanding by 43 basis points. Liquor sales fell 3.3% and management began a multi-year repositioning of that division. The total FY26 Dividend was 78 cents per share, fully franked, including a 37-cent final.

That encouraging earnings growth is the baseline against which the first-half guidance of flat Supermarkets EBIT should be read. Coles also said FY27 sales growth was tracking similarly to the final quarter of FY26 at the time, which makes the moderation seen in the first-quarter update a notable shift in tone. Exclusive to Coles sales had grown 6.1% across FY26, so the 4.3% first-quarter rate also points to a slower private label contribution than a year earlier.

Competition and cost-of-living pressure

Chief executive Leah Weckert said household budgets are under pressure and that customers are shopping more deliberately across retailers and channels. Coles described competition and promotional activity as heightened, and said this slowed comparable sales growth.

The company said Supermarkets sales stayed resilient in the first four weeks of the second quarter but growth had moderated. In August, it had also noted a temporary dip during a competitor's collectibles campaign, with sales then recovering to the fourth-quarter level.

The competitive field includes Woolworths, Aldi and a range of independent and specialist retailers. Investors tracking the sector will usually compare growth rates, margins and price perception between the two major chains.

Earnings guidance and investment

Coles expects first-half FY27 Supermarkets EBIT, excluding significant items, to be in line with the prior corresponding period, citing higher fuel costs. The second quarter runs for 14 weeks, from 28 September 2026 to 3 January 2027, and includes the Christmas trading period.

Management has said it is accelerating store openings and renewals, expanding eCommerce and automation, and building a new automated distribution centre in Victoria. It has also described targeted Investment in value and customer experience. These initiatives can support long-term capacity and efficiency, but they add near-term spending and execution requirements.

Risks and what to watch

Key uncertainties include how long promotional intensity persists, whether cost-of-living pressure softens discretionary and premium spending, and how effectively Coles can offset higher fuel and labour costs through automation and efficiency programmes. Liquor remains in transition, with sales still declining, and the end of the Viva Energy agreement removes a source of sales from the Other segment.

Execution risk also applies to the supply chain program and the accelerated store rollout.

Upcoming events include trading updates through the Christmas period and the half-year result, the date of which should be confirmed on the company's calendar, which will show whether flat first-half Supermarkets EBIT proves a pause or a lasting shift. Guidance is management's expectation, not a certainty.