Check-out time for Coles on results as focus magnifies
Australian supermarket giant Coles is under the spotlight again as it reports its next profit results after spending the week defending claims it misled customers during a marketing campaign.
The group, which has more than 850 stores across the country, will announce its earnings for the first half of 2025/26 on Friday.
Based on the consensus in market forecasts, Coles is once again expected to post a net profit of between $689 and $709 million, well above the $576 million result achieved in the previous corresponding period.
Its underlying earnings could be around $2.2bn, above 2024/25’s $2bn half-year result.
Early signs point to solid sales, but the strength of the results will depend on whether margins improve, eToro market analyst Josh Gilbert told AAP.
Investors want to see benefits from automated distribution centers and growth in high-margin areas like e-commerce, he said.
“If we can start to see that play out as a result, that’s really what we’re looking for,” Mr. Gilbert said.
Coles has spent the week defending claims from the Australian Competition and Consumer Commission that it misled customers with fake discounts on thousands of products.
The consumer watchdog claimed the retail giant inflated prices before dropping them above their original levels as part of its “down” campaign launched in 2021.
Coles maintained that the discounts were real during the week-long trial.
It’s unclear whether the controversy will affect where customers shop, Mr. Gilbert said.
Woolworths could face similar fallout as the consumer watchdog prepares to take legal action against the country’s other major chain from April.
The group’s stronger-than-expected half-year results, released on Wednesday, have put additional pressure on Coles to maintain its strong growth lead over seven quarters.
Excluding one-off costs, Woolworths made a net profit of $859 million for the period, up 16 percent.
Shares in the country’s largest supermarket giant rose 13 percent on Wednesday after the results were announced; this was the largest single-day gain in history.
Mr Gilbert said there was no definitive conclusion that would suggest Woolworths’ results had come close to Coles, but suggested its promotional spend had paid off.
“They’re back to winning customers back,” he said.
“They end up coming back and, more importantly, shopping more frequently across channels.”
While feedback suggests Woolworths is gaining market share, Macquarie analysts believe Coles remains the preferred option for investors.
“We are attracted to a stronger margin and earnings outlook for (Coles) that provides ongoing benefits through scaling of supply chain assets,” he said in a research note shared with AAP.
Mr Gilbert said given the strength of Woolworths’ results, anything less than Coles’ strong performance would have share price consequences.
“Woolworths really put them under pressure,” he said.
“If Coles’ performance is just standard or par for the course, I think we’ll see shares trading lower.”
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