Coles reported supermarket sales growth of 3.6% for the 13 weeks to 27 September, compared with Woolworths' first quarter sales growth of 6.9%, The Nightly reported. Coles shares fell 7.7% on the day of the announcement, closing at $21.66, a near-five month low, and reducing the company's market capitalisation by $2.4 billion.
Coles' supermarket sales for the quarter totalled $10.3 billion, up from nearly $10 billion in the same period a year earlier. Total group sales revenue reached $11.2 billion, while liquor sales fell 1.3% to $831 million.
At its peak intraday decline, the share price dropped 12% before closing lower. Part of Woolworths' stronger sales growth was attributed to a Disney Ooshies collectables campaign.
Chief executive Leah Weckert said the company was taking action to sharpen its offer and was increasing price investment, as it expected conditions for consumers to become more difficult heading into Christmas. Weckert said competitive pressure was high, with many retailers competing for customer spending each week, and that shoppers were actively checking prices. Evidence of customer caution included greater purchase of specials and increased use of FlyBuys loyalty points, she said.
Weckert said customers with stretched budgets were weighing up discretionary choices such as whether to buy a cafe coffee or make one at home, and were moving toward more affordable meal ingredients. Demand for high-protein products was strong, with meat, canned fish including sardines, and yoghurt all selling well. Weckert said shoppers were cautious and watching their budgets closely, and were expected to dine at home more frequently over the Christmas period as a way of managing expenses.
Coles expanded its Every Day Price program to cover more than 4000 products and the initiative is expected to run for at least six months. Digital orders were growing strongly, and products designed for speed and convenience, including air fryer-ready items and Coles Made Easy meals ready in under 20 minutes, were popular with shoppers, Weckert said. She noted that rising fuel prices over the preceding two months would add to costs for the group during the first half of FY27 relative to the same period a year earlier.
The results drew political attention. House Economics Committee chair Ed Husic said price interventions or price caps on basic groceries were measures his government should seriously consider to help people struggling with living costs, Yahoo News reported. Husic said companies could not continue to profit while pushing cost burdens onto Australians, citing the government's 2022 coal and gas price caps, introduced in response to Russia's invasion of Ukraine, as an example of price controls being applied on a temporary basis.
Assistant Treasurer Daniel Mulino pointed to the government's measures including mandatory grocery code of conduct, stronger ACCC oversight of key sectors, and a tenfold increase in penalties for market manipulation and price gouging.
Coles has indicated it intends to lower shelf prices and increase price investment, which could benefit shoppers looking for cheaper grocery options. Weckert warned that the consumer environment was expected to become more difficult heading into Christmas. Fuel cost pressures will weigh on the company's expense base across the first half of FY27 compared with the equivalent period in the prior year.
Reporting: The Nightly, Yahoo News, Yahoo Finance
Background: The Motley Fool Australia
Written by Pick & Scroll News from the reporting and documents linked above.
