Woolworths, Coles warn of rising costs as Iran war drives up Australia's prices (updated)

Woolworths

04/05/2026 24:50

Repeats May 1 story with no changes to text

Coles Q3 sales revenue beats market consensus

Coles early Q4 supermarket sales growth in line with Q3

Sees increase in supplier requests for price hike

Sees higher costs within own operations

Coles shares up 3.6%, WOW down 0.7%

By Rajasik Mukherjee, Shivangi  Lahiri and Sameer Manekar

May 1 (Reuters) -
Australia's top two grocers sounded the alarm on growing price pressures as the U.S.-Israeli war on Iran drives up fuel and raw material costs for suppliers, threatening to squeeze households that were already grappling with a cost-of-living crunch.

Woolworths WOW.AX and Coles COL.AX, which account for more than two-thirds of Australian grocery sales, warned this week that their suppliers were feeling "genuine cost pressures" and seeking price increases.

Both retailers are being forced to absorb supplier costs amid intense regulatory scrutiny on supermarket pricing practices while expenses tied to rising fuel, freight and packaging mount.

Woolworths froze the shelf prices of hundreds of staple products, while Coles planned to lean on its own-brand portfolio.

"The conflict in the Middle East has brought a new wave of uncertainty and we're hearing from our customers that they're worried about what it means for their household budget," Woolworths CEO Amanda Bardwell said on
Thursday
.

An April
report
 showed Australian consumer sentiment had slumped to its lowest in over two years, as consumers grappled with the ramifications of the Iran conflict while already dealing with tepid wage growth, expensive housing and higher fuel prices.

A
hot inflation print
 in the first quarter has reinforced bets of a rate hike from the Reserve Bank of Australia next week.

"The bigger story for both [Woolworths and Coles] is that Australian consumers are feeling the squeeze and the second half is going to be a real test of how much margin pressure these supermarkets can carry," said Josh Gilbert of eToro, a trading platform.

STRONG THIRD QUARTER RESULTS

Third-quarter sales for both firms beat market expectations, driven by promotions, though rising costs indicated pressure in the months ahead.

Woolworths posted a consensus-beating
group sales
 of A$18.10 ⁠billion ($12.89 billion), while Coles' group sales of A$10.70 billion also beat the consensus, though more modestly.

"Sales trends for supermarkets appear to have continued early into the 4Q which is positive as we anticipate a narrowing of WOW's market share outperformance vs COL heading into the 4Q," RBC Capital Markets analyst Michael Toner said.

Woolworths shares, however, plunged as much as 10% on Thursday after it warned that its 2026 domestic food ‌segment earnings growth would no longer reach the upper end of its guidance range. Its shares fell 0.7% on Friday, bringing its weekly loss to about 10%, the worst stretch since late August.

Coles shares, on the other hand, shot up more than 3% on Friday as it did not warn of any earnings downgrade.

"The simplest way to think about it is that Woolworths effectively gave the market reason to worry yesterday and Coles didn't," Gilbert said.

($1 = 1.3908 Australian dollars)

 (Reporting by Shivangi Lahiri, Rajasik Mukherjee, Sameer Manekar, and Nichiket Sunil in Bengaluru; Editing by Sahal Muhammed, Sherry Jacob-Phillips, Rushil Dutta, and Subhranshu Sahu)

 ((Nichiket.Sunil@thomsonreuters.com;))