Australia's Coles posts 11% drop in first-half profit, misses estimates (updated)

Coles

26/02/2026 22:08

First-half profit down 11%, misses estimates

Underlying profit up 12.5%

Supermarket Q3 to-date sales growth 3.7%, slower than expected

Shares down 8%, worst day since March 2020

Recats paragraph 1, updates with share moves in paragraph 2, analyst comment in paragraph 4, Woolworths shares in paragraph 5

Feb 27 (Reuters) -
Coles COL.AX flagged on Friday a sluggish start to the second half of fiscal 2026, citing mounting competition from larger rival Woolworths as it steps up efforts to regain market share, sending shares of Australia's second-largest grocer down 8%.

        Shares of Coles tumbled up to 8.3% to A$20.340, marking their worst session since March 31, 2020. The stock fell to its weakest point since July 30.

Coles said sales at its Supermarkets division rose 3.7% in the first seven weeks of the third quarter, missing market expectations of 4.3% and trailing the 5.8% growth reported by larger rival Woolworths' Australian Food business.

"Trading update suggests Woolworths has regained sales leadership, but Woolworths' strong share price performance suggests the market has already worked that out," analysts at Jefferies wrote.

Shares of Woolworths WOW.AX soared 13% on Wednesday after the country's largest grocer reported forecast-beating first-half profit and raised its annual outlook. They were trading nearly 1% down in early trading on Friday.

Coles and Woolworths, which together ring up two-thirds of Australian grocery sales, have been locked in an intense battle for market share, using discounts and marketing firepower to appeal to cost-conscious consumers.

"We know value remains front of mind for our customers," Coles CEO Leah Weckert said.

"We expect the market to remain highly competitive."

Coles recorded a one-off charge of A$235 million during the six-month period ended January 4 in relation to additional remediation expenses after the court
found
 it had underpaid thousands of workers in September last year.

That crimped its post-tax profit attributable to shareholders, which slipped 11.3% to A$511 million ($363.17 million) for the six months ended January 4, missing the Visible Alpha consensus of A$674.5 million.

On an underlying basis, profit rose 12.5% to A$676 million, buoyed by a 14.6% surge in earnings from its Supermarkets division as shoppers hunting for discounts and value offerings lifted sales.

However, earnings at the Liquor division plunged 37.3% in the first half to A$42 million as sales fell 3.2%, weighed down by weak demand and stiff competition. Sales were down a further 2.5% in the first seven weeks of the current quarter.

The grocer announced an interim dividend of 41 Australian cents a share, higher than the 37 cents declared last year.

($1 = 1.4071 Australian dollars)

 (Reporting by Sameer Manekar in Bengaluru; Editing by Shinjini Ganguli, Maju Samuel and Sherry Jacob-Phillips)

 ((Sameer.Manekar@thomsonreuters.com;))