Coles Group posted a 3.1% lift in total sales for Q3 2026, driven by strong supermarket sales and a near 25% surge in eCommerce, while liquor sales fell amid soft consumer sentiment.
- Supermarket sales revenue up 4.0% with 3.6% comparable growth
- eCommerce penetration in supermarkets rises to 13.6%
- Liquor sales decline 3.9% with 4.3% comparable sales drop
- Inflation pressures ease in supermarkets but supplier costs rise
- Product Supply Agreement with Viva Energy expires November 2026
Supermarkets Drive Group Sales Growth
Coles Group Limited (ASX:COL) recorded a 3.1% increase in total group sales revenue to $10.7 billion for the third quarter ending March 29, 2026. This growth was anchored by a 4.0% rise in supermarket sales to $9.78 billion, with comparable sales up 3.6%. Excluding tobacco, sales growth was even stronger at 5.7%, reflecting robust volume gains supported by targeted promotions and an expanded everyday value range. The company also noted a 5% increase in Flybuys active members to 10.3 million and a 75% jump in Coles Plus subscriptions, highlighting growing customer engagement.
eCommerce sales in supermarkets surged 24.8% to $1.33 billion, pushing penetration up 226 basis points to 13.6%. This online momentum was sustained across all fulfilment channels, with penetration peaking at 14.2% in March. The digital uplift aligns with Coles' ongoing investment in its online platforms and reflects shifting consumer shopping habits. The supermarket segment also saw 17 store renewals and the opening of two new supermarkets, including an integrated food and liquor store in Glen Iris, Victoria.
Price inflation in supermarkets moderated to 0.8% excluding tobacco, down from 1.7% in the prior quarter. Deflation in fresh produce categories and increased promotional activity helped offset inflationary pressures in red meat. This moderation comes despite geopolitical tensions driving elevated demand for pantry staples in March, illustrating Coles’ ability to balance value and availability for customers amid volatile market conditions.
Liquor Segment Faces Continued Challenges
The liquor segment reported a 3.9% decline in sales revenue to $781 million, with comparable sales down 4.3%. While convenience stores, which make up around 90% of the network, held steady, warehouse stores experienced more significant weakness. The segment’s performance was hampered by a highly competitive market and softer consumer sentiment, particularly in March amid geopolitical uncertainty. eCommerce sales in liquor grew modestly by 1.8%, supported by an expanded partnership with Uber Eats, increasing penetration to 7.4% (8.6% including liquor sold through Coles Online).
Customer satisfaction metrics improved following simplification of the Liquorland banner, with a 7.2% increase in Flybuys swipe rates. Despite this, the segment saw a net reduction of 13 stores during the quarter, with one new store opened, 14 closures, and two renewals completed. Coles signaled that ongoing consumer caution is expected to weigh on liquor earnings through the second half of the year due to reduced fixed cost absorption.
Other Segment and Cost Pressures
The Other segment generated $141 million in revenue, primarily linked to the Product Supply Agreement (PSA) with Viva Energy Group Ltd, which is set to expire by the end of November 2026. Coles’ management flagged rising supplier cost price increase requests and higher operational costs, notably in fuel, freight, and packaging. These inflationary pressures are expected to persist, prompting active management to mitigate impacts while balancing customer and supplier needs.
Outlook Reflects Market Volatility and Consumer Focus
Early indications for the fourth quarter suggest supermarket sales growth remains consistent with the third quarter, despite geopolitical tensions pushing up fuel and commodity prices. Coles CEO Leah Weckert emphasised the company’s commitment to providing value and availability, leveraging its own brand portfolio and eCommerce capabilities to meet evolving customer needs as more Australians cook at home to manage household budgets. However, the liquor segment is expected to face ongoing earnings pressure from subdued consumer sentiment and cost challenges.
The sales momentum in supermarkets builds on a trend of steady growth, following a 3.9% rise in Q1 FY26 and a 2.5% increase in H1 FY26 revenue, although liquor sales have consistently lagged, as noted in prior reports. This divergence underscores the challenges Coles faces in balancing growth across its diverse retail portfolio while navigating inflationary headwinds and competitive pressures. The upcoming expiration of the Viva Energy PSA adds an additional variable to the group’s income streams in the near term.
Bottom Line?
Coles’ supermarket strength and digital growth provide a solid foundation, but rising costs and liquor segment softness pose challenges ahead.
Questions in the middle?
- How will Coles manage supplier cost increases without eroding customer value?
- Can eCommerce penetration continue its rapid growth amid evolving consumer habits?
- What impact will the expiration of the Viva Energy PSA have on Coles’ financials?