Key Highlights

• Supermarkets Revenue was $10,320m, up 3.6% from $9,965m a year earlier, while Liquor revenue fell 1.3% to $831m.

• Supermarkets dominates the group: in FY26 (52 weeks to 28 June 2026) it generated $41,472m of the group's $45,580m sales revenue and $2,365m of EBIT.

• EBIT excluding significant items rose 9.9% to $2,322m, and NPAT excluding significant items rose 13.7% to $1,255m.

• It expects total FY27 Capital Expenditure of about $1.55bn, after FY26 gross operating capex of $1,189m and net capex of $1,406m.

Why has Coles Group (ASX:COL) told investors that first-half supermarkets Earnings should only match last year, even though supermarket sales are still growing? The short answer is a combination of slower momentum, higher fuel costs and a deliberate decision to put more money into lower prices. In its first-quarter sales release on 30 October 2026, Coles said first-half FY27 Supermarkets EBIT, excluding significant items, is now expected to be in line with the prior corresponding period. That is a more cautious note than the encouraging full-year result reported two months earlier.

The central development: a softer quarter and a cautious outlook

Coles reported first-quarter FY27 numbers for the 13 weeks from 29 June to 27 September 2026. Group sales revenue was $11,209m, up 2.2%. Supermarkets revenue was $10,320m, up 3.6% from $9,965m a year earlier, while Liquor revenue fell 1.3% to $831m. Supermarkets comparable sales growth was 2.7%, against 4.6% in the first quarter of FY26.

The outlook statement matters more than the headline sales line. Coles said supermarkets sales had stayed resilient in the first four weeks of the second quarter, but growth had slowed compared with the first quarter. It also said fuel costs are expected to be higher in the first half than a year earlier, and that the liquor sales decline early in the second quarter is broadly in line with the first. Chief executive Leah Weckert said household budgets remain under pressure and that customers are shopping more deliberately across retailers and channels, adding that Coles is investing more in lower prices and value.

Supermarkets Inflation was 1.1% in the quarter, down from 1.6% a year earlier, and 0.7% when tobacco and fresh food are excluded.

Business model and revenue drivers

Coles operates supermarkets and liquor retail in Australia, with a smaller "Other" segment. Supermarkets dominates the group: in FY26 (52 weeks to 28 June 2026) it generated $41,472m of the group's $45,580m sales revenue and $2,365m of EBIT. Liquor contributed $3,547m of sales but only $59m of EBIT, and Other recorded an EBIT loss of $102m, reflecting corporate costs and the winding down of the Viva Energy commercial agreement.

Supermarkets earnings are driven by traffic, basket size, product mix, private label, Supply chain efficiency and retail media. First-quarter FY27 supermarkets eCommerce sales were $1,623m, up 22.9%, lifting penetration to 15.7% from 13.3%. In FY26, eCommerce sales were $5.6bn, up 26.4%, with penetration of 13.6%.

FY26 results in context

Coles reported FY26 sales revenue of $45,580m, up 2.8%. EBIT excluding significant items rose 9.9% to $2,322m, and NPAT excluding significant items rose 13.7% to $1,255m. Reported NPAT including significant items was $1,090m, up 1.0%. The difference reflects $235m pre-tax ($165m after tax) of significant items tied to a Federal Court judgment in September 2025 in Fair Work Ombudsman proceedings.

Supermarkets EBIT rose 12.2% with a Margin of 5.7%, up 43 basis points, helped by sales growth of 5.1% excluding tobacco. Liquor was the weak spot: EBIT fell 47.8% and management described performance as below expectations, with elevated promotional activity and $20m of one-off Simply Liquorland costs.

Total FY26 dividends were 78 cents per share, fully franked, up 13.0%, including a final Dividend of 37 cents.

Investment, automation and the cost base

Coles is in the middle of a heavy Investment cycle. It expects total FY27 capital expenditure of about $1.55bn, after FY26 gross operating capex of $1,189m and net capex of $1,406m. Management has accelerated its store programme, planning about 45 new supermarkets and 150 renewals over two years, backed by an extra $300m by the end of FY28. For FY27, the plan is roughly 25 supermarket openings, about three closures and about 75 renewals.

Automation is the main efficiency lever. Two automated distribution centres and two customer fulfilment centres are fully operational, and the fulfilment centres reached positive EBITDA in their second year. The Victorian distribution centre, an $880m project, is described as on time and on budget, with capacity of 4.6 million cartons a week and development expected to finish by FY30. The Coles Capability Centre is expected to deliver run-rate savings above $100m by the end of FY29, though FY27 brings about $190m of mostly expensed cost, and Victorian implementation costs of about $35m are expected in FY28. These are company targets, not outcomes.

Sector position and competition

Australian grocery remains a concentrated market in which Coles competes mainly with Woolworths, Aldi and Costco, as well as independent grocers and online specialists. Coles said sales dipped temporarily in late July and early August 2026 during a competitor's campaign before recovering. The company's response, a larger "Exclusive to Coles" range, including its largest-ever Christmas range, and lower prices on key items, signals a focus on defending traffic ahead of the festive period.

Risks and what to monitor

Coles' own risk list is a useful guide: competition, consumer behaviour under cost-of-living pressure, macroeconomic and geopolitical conditions including fuel costs, new technology adoption, climate-related disruption and legal change. The change program also brings dual-running and redundancy costs.

The 2026 Annual General Meeting is scheduled for 6 November 2026. The second quarter runs from 28 September 2026 to 3 January 2027, so the festive trading period will test whether price investment restores sales momentum. The end of the Viva Energy agreement in November 2026 will reduce Other segment revenue. Investors will also look for evidence that liquor stabilises and that supermarkets margins hold at around the FY26 level while the group spends more on stores and supply chain.

Coles' guidance covers only first-half supermarkets EBIT, so full-year expectations remain open. The next test is whether growth in online, retail media and efficiency can offset slower sales and a heavier investment programme.