Coles shares tumble as profit outlook dims amid heightened competition
Coles' stock fell about 10% after the retailer warned of flat first-half profits and rising fuel and supplier costs, wiping roughly $3.5 billion from its market value.
Coles Group Ltd saw its shares drop around 10% in early trading on Monday following the release of its September quarter results, which projected flat supermarket profits for the first half of the fiscal year. The decline erased an estimated $3.5 billion from the company's market capitalisation.
Revenue from supermarket sales rose 3.6% to $10.3 billion, driven by strong e-commerce growth, but the gains were partly offset by intensified price competition and a surge in promotional activity. The retailer cited higher fuel expenses, supplier price hikes linked to rising wages, utilities, rent and insurance, and an expectation that these pressures would keep profits level with the prior period.
"Customers are really feeling the pressure on their household budgets," Coles chief executive Leah Weckert said on a media call. "They’re really seeking out value now by buying more specials, and they’re using their loyalty points. As we come into Christmas … there will be more meals eaten at home, less going out."
Weckert added that non-traditional entrants such as pharmacy chains and specialist online retailers are increasing competition for grocery spend. She noted that while overall supermarket price inflation remained modest at 1.1% year-on-year, certain items – including grapes, berries, tomatoes, corn, baby broccoli, eggs and vitamins – were being sold at deflationary prices.
Citi analyst Adrian Lemme said the flat-profit guidance represented a downgrade from the firm’s earlier forecast of 8% growth, attributing the slowdown to Woolworths' pricing strategies that have pressured Coles' sales momentum.
The Australian Bureau of Statistics reported a 4.3% rise in consumer prices over the 12 months to September, raising expectations of another interest-rate increase by the Reserve Bank at its upcoming meeting. Weckert observed that shoppers, particularly younger families, are increasingly using AI tools, price-comparison apps and social media to find the cheapest options, and that high-protein items such as meat, canned fish and yoghurt are strong sellers. She highlighted a surge in demand for convenient products suitable for quick preparation in air fryers.