Coles Premium Brands Drive Growth Amid Liquor Weakness

Coles has reported stronger annual sales, with rising demand for its premium home brand products helping to offset weakness in its liquor division.

For the year ending 29 June, supermarket revenue climbed to $40 billion, up 4.3 per cent compared to the previous year, despite the prior period including an extra week of trade. Like-for-like sales increased 3.7 per cent, surpassing analyst expectations. Excluding tobacco, sales jumped by 5.7 per cent. Tobacco sales slumped by 30 per cent as the illegal trade continued to expand, undercutting legitimate retailers who face high government excises.

Underlying net profit rose 3.1 per cent to $1.18 billion. The result was supported by cost reductions delivered through Coles’ Witron and Ocado distribution and home delivery facilities, which are now fully operational. Following the announcement, Coles shares surged 7.5 per cent to $22.28 in early trading on Tuesday.

The company recorded steady growth in both transaction numbers and average basket size, driven by promotional strategies focused on everyday value and a reduced but deeper discounting approach. The standout performer was Coles Finest, its premium home brand range, which grew 13.3 per cent in the past year. This was well ahead of overall store growth, reflecting consumer interest in quality products at affordable prices.

Although there are signs of improvement in consumer sentiment, many households remain under financial strain. Customers continue to rely on loyalty points, cross-shop at multiple retailers, and cut back on discretionary spending such as takeaways, dining out and treats.

Coles’ core supermarket division produced robust earnings growth. Underlying EBIT margins improved from 5.3 per cent a year ago to 5.5 per cent in 2025, aided by reduced theft and improved sourcing arrangements. Food price inflation within supermarkets held steady at 1.5 per cent during the fourth quarter, providing stability for both consumers and the retailer.

The liquor business, however, faced tougher conditions. Reduced consumer spending on alcohol led to weaker sales and earnings. Coles responded with a major rebranding strategy, converting 984 of its alcohol outlets to the Liquorland name, and phasing out the Vintage Cellars and First Choice Liquor Market banners. The move was designed to sharpen its competitive position against Endeavour Group’s Dan Murphy’s. Early signs from the transition show that customers are responding positively, with improvements in sales and transaction growth beginning to emerge.

In the opening eight weeks of the new financial year, Coles supermarkets recorded a 4.9 per cent increase in sales. Liquor revenue was flat overall but still performed better than in the closing quarter of the previous year. Importantly, Coles’ liquor sales outpaced Endeavour’s Dan Murphy’s and BWS chains, which recorded a 1.3 per cent fall over the same period.

The company declared a fully franked final dividend of 32 cents per share, to be paid on 22 September. This matches the payout from the previous year, reflecting a consistent return to shareholders.

Overall, Coles has demonstrated resilience in a challenging retail environment. Strong demand for its premium home brand range and improvements in its supermarket operations have helped balance the difficulties in its liquor division. With continued investment in efficiency, a focus on value for customers, and strategic adjustments in its alcohol business, the group has positioned itself for further growth in the year ahead.

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