Coles Group reported a 2.5% revenue increase to $23.7 billion for the half year ended January 2026, driven by strong supermarket sales, but earnings were weighed down by a $235 million provision linked to a Fair Work Ombudsman ruling. The company declared a fully franked interim dividend of 41 cents per share.
- Revenue up 2.5% to $23.7 billion
- EBIT excluding significant items rose 10.2% to $1.23 billion
- $235 million provision for Fair Work Ombudsman judgment impacts net profit
- Supermarkets segment delivers 3.6% sales growth and margin expansion
- Liquor segment sales and EBIT decline amid competitive pressures
Overview of Financial Performance
Coles Group Limited has released its half year results for the 27 weeks ending 4 January 2026, revealing a nuanced financial picture. The company posted a 2.5% increase in revenue to $23.7 billion, underpinned by solid growth in its supermarket operations. However, earnings before interest and tax (EBIT) including significant items declined by 7.9% to $996 million, primarily due to a substantial $235 million provision related to a Federal Court judgment concerning Fair Work Ombudsman proceedings.
Excluding these significant items, EBIT rose 10.2% to $1.23 billion, reflecting operational improvements and cost efficiencies, particularly in the supermarket segment. The net profit after tax attributable to members fell 11.3% to $511 million, mirroring the impact of the legal provision.
Segment Performance: Supermarkets and Liquor
The supermarkets division demonstrated resilience and growth, with sales revenue increasing 3.6% to $21.4 billion. Adjusted for competitor industrial action and tobacco sales, comparable sales growth reached 6.1%. This growth was supported by strategic investments in value campaigns, price reductions on key fresh produce, and a broadened everyday value range. The segment’s gross margin improved by 65 basis points to 27.8%, aided by the annualised benefits of the Automated Distribution Centre (ADC) program and strategic sourcing initiatives.
Supermarkets EBIT surged 14.6% to $1.23 billion, with an EBIT margin of 5.8%, benefiting from the absence of major project implementation costs that had weighed on the prior period. eCommerce sales within supermarkets grew strongly by 27%, boosted by expanded same-day delivery services and partnerships such as the Uber Eats collaboration.
Conversely, the liquor segment faced headwinds, with sales revenue declining 3.2% to $1.94 billion amid subdued market conditions and intensified competition. EBIT fell sharply by 37.3% to $42 million, impacted by one-off costs related to the 'Simply Liquorland' banner conversions and operational model simplifications. Despite these challenges, eCommerce sales in liquor showed modest growth, and the segment completed 127 store renewals during the period.
Legal and Regulatory Challenges
Coles’ financial results were notably affected by a $235 million provision following a Federal Court judgment in September 2025 related to the Fair Work Ombudsman’s proceedings on pay arrangements for salaried team members covered by the General Retail Industry Award. While orders are yet to be determined and appeals remain possible, this provision significantly impacted net profit for the half.
Additionally, Coles is defending ongoing Australian Competition and Consumer Commission (ACCC) proceedings and a related class action alleging misleading conduct in its 'Down Down' pricing promotions. The outcome and potential penalties from these cases remain uncertain, posing ongoing legal and reputational risks.
Balance Sheet and Dividend
The balance sheet reflected seasonal inventory build-up and operational funding needs, with inventories rising by $222 million to $2.96 billion and interest-bearing liabilities increasing by $434 million to $2.42 billion. The company maintained a strong capital position, with net tangible assets per share increasing to $1.24.
Directors declared a fully franked interim dividend of 41 cents per share, up from 37 cents in the previous corresponding period, signalling confidence in the underlying business despite legal headwinds. The dividend reinvestment plan will operate at nil discount, allowing shareholders to reinvest dividends into additional shares.
Looking Ahead
Coles continues to invest in its supply chain, retail media, and eCommerce capabilities while navigating a complex legal environment. The company’s ability to sustain supermarket momentum and manage regulatory risks will be critical as it approaches the second half of the fiscal year.
Bottom Line?
Coles’ strong supermarket growth is tempered by significant legal provisions, setting the stage for a cautious market watch on regulatory outcomes.
Questions in the middle?
- How will the final court orders and potential appeals impact Coles’ financial provisions related to the Fair Work Ombudsman case?
- What are the possible financial and reputational consequences of the ongoing ACCC and class action proceedings on pricing practices?
- Can Coles sustain its supermarket sales momentum and margin expansion amid cost inflation and competitive pressures?