Coles, one of the country’s two dominant supermarket chains, is coming off a long period when it regularly outpaced its main rival yet the balance appears to be shifting. For more than a year and a half Coles had been growing faster but in the first seven weeks of the new year its supermarket sales rose about 3.7% and lagged the roughly 5.8% growth reported by its larger competitor. This is happening in a market where the two big players together control close to 70% of grocery spending while discount chains work hard to undercut them on price.
Over the latest half-year period to early January, Coles’ supermarket division lifted sales by around 3.6% to about $21.4 billion, which helped pre-tax earnings climb to roughly $1.23 billion, an increase of just over 10%. However, profit after tax slipped by more than 11% to about $511 million once the business set aside money to fix historic staff underpayments, showing how labour and compliance costs can bite even as revenue rises. At the same time its liquor arm struggled, with sales falling by a little more than 3% and investors reacted sharply, sending the share price down more than 7% in a single session to about $20.56, its weakest level in months and enough to widen the valuation gap with its key rival to around $16 billion.
In the background, discount competitors are also adjusting. Aldi has been trimming the range of branded products it stocks to lean more heavily on its own labels, where margins are usually stronger, and it is now offering online delivery through a partnership with a third-party platform. This suggests Coles’ and Woolworths’ recent price moves are forcing challengers to rethink their strategy even though the big chains still hold the bulk of the market. Analysts note that Coles’ growth in core supermarkets is solid but slightly below what many in the market had expected and the liquor weakness adds another layer of concern.
Looking ahead, the picture seems finely balanced. Coles appears to be holding on to many of the extra customers it picked up during its rival’s supply disruptions last year and is likely still taking share from smaller operators yet it now faces a competitor with renewed momentum and a more agile discount player experimenting with online delivery. If cost pressures, wage obligations and softer liquor sales persist, Coles may need to keep cutting harder on prices, invest more in its stores or reshape its product mix, moves that could support market share but weigh on profits. The next few quarters will show whether the current slowdown is just a bump in the road or the start of a tougher phase in the supermarket race.
