Tobacco sales slump to weigh on Australian supermarkets through FY26, says Morgan Stanley

Woolworths

07/08/2025 24:56

** Morgan Stanley expects the rapid decline in tobacco sales to continue adding pressure on top-line growth for Australian supermarkets through FY26

** Flags impact of sales decline as broadly consistent with FY25 for Australian retailers

** Tobacco now accounts for just 3–4% of total sales at supermarkets, limiting the overall revenue drag to ~100bps per annum, analysts estimate

** Shift away from tobacco is expected to boost gross profit margins by 20–25bps in both FY25 and FY26 for major supermarket operators, says Morgan Stanley

** Top Australian supermarkets Woolworths WOW.AX and Coles COL.AX set to report results later this month

** WOW stock up 4.1% YTD while COL has gained 11.4%

 (Reporting by Rishav Chatterjee in Bengaluru)

 ((Rishav.Chatterjee@thomsonreuters.com;))