Coles Reports FY26 Revenue Up 2.8% and NPAT Rise Amid Regulatory Provisions

Supermarkets Drive Earnings Growth and Market Share Gains

Coles Group Limited (ASX:COL) posted a steady 2.8% increase in group sales revenue to $45.58 billion for the fiscal year ended 28 June 2026, with supermarkets accounting for the lion’s share of growth. Supermarkets sales rose 3.7% (5.1% excluding tobacco), underpinned by a strengthened value proposition featuring an expanded everyday value range, targeted promotions, and the Exclusive to Coles portfolio, which itself grew 6.1%.

Supermarkets EBIT surged 12.2% to $2.365 billion, with EBIT margin expanding 43 basis points to 5.7%, driven by operating leverage and disciplined cost control. The segment’s eCommerce sales grew 26.4% to $5.6 billion, pushing penetration to 13.6%, supported by positive EBITDA from the Customer Fulfilment Centres (CFCs) in their second year of operation and an expanded Uber Eats partnership enhancing on-demand grocery delivery.

Liquor Segment Under Review Amid Sales and Earnings Decline

In contrast, the liquor division faced headwinds with sales revenue declining 3.3% to $3.547 billion and EBIT plunging 47.8% to $59 million. While gross margin improved by 40 basis points, inflationary pressures, fixed cost deleverage, and $20 million in one-off costs related to the Simply Liquorland program weighed heavily on profitability. Coles is executing a strategic review and repositioning program for the liquor business, focusing on integrating food and drink offerings, optimising the store network with greater supermarket co-locations, and simplifying the operating model to boost future performance.

Regulatory Provisions and Legal Proceedings Weigh on Results

The company recorded significant items of $235 million ($165 million after tax) related to a Federal Court judgment concerning historical pay arrangements for award-covered salaried team members. Coles has apologised to affected employees and is committed to remediation, though final orders remain pending. Additionally, the Federal Court found certain promotional ticketing practices misleading, though supplier-driven price increases were deemed commercially justifiable. These regulatory matters introduced uncertainty over potential penalties and further remediation costs.

Despite these challenges, net profit after tax (NPAT) excluding significant items rose 13.7% to $1.255 billion, while reported NPAT including significant items was $1.09 billion, a 1.0% increase. The board declared a fully franked total dividend of 78.0 cents per share, up 13.0% from the prior year, with a final dividend of 37.0 cents payable on 22 September 2026.

Sustainability and Digital Initiatives Advance

Coles continued to make strides in sustainability, releasing its first Climate Transition Plan and maintaining 100% renewable electricity sourcing. The company’s FY26–FY30 Sustainability Strategy focuses on climate, nature, and circularity, with targets including a 30.3% reduction in Scope 3 Forest, Land and Agriculture emissions by FY30 and an 80% supplier engagement target for science-based emissions reduction plans.

Digital transformation remains a core growth driver. Coles 360 retail media income grew 10%, and AI adoption expanded with initiatives such as ChatGPT Enterprise rollout to store support teams. The Victorian Automated Distribution Centre (ADC) construction progressed on schedule and budget, with automation fit-out underway to enhance supply chain efficiency.

Strong Balance Sheet Supports Growth and Investment

Coles ended FY26 with net assets of $3.946 billion and a lease-adjusted leverage ratio of 2.3x, supported by strong cash generation and a liquidity reserve of $2.5 billion in undrawn facilities. Capital expenditure plans for FY27 include approximately $1.55 billion in operating capital, plus a $190 million one-off investment in the new Coles Capability Centre, a strategic partnership with Accenture aimed at accelerating technology delivery and operational efficiency.

The company plans to accelerate store openings and renewals, with around 45 new supermarkets and 150 renewals targeted over the next two years, alongside expanded online fulfilment capacity and technology simplification to drive AI adoption.

Executive Remuneration Reflects Regulatory Impact and Performance

The board exercised discretion to reduce FY26 short-term incentive (STI) payments for executive leadership team members accountable for the regulatory matters, including a 20% STI target reduction for CEO Leah Weckert and 10% for Chief Operations and Supply Chain Officer Matthew Swindells. The FY24 long-term incentive (LTI) vested at 72% of maximum, reflecting solid returns with cumulative return on capital at 102.7% of target and relative total shareholder return at the 58.5th percentile.

What to Watch Next

Coles enters FY27 with momentum in supermarkets and digital channels, but the liquor segment’s turnaround and regulatory case outcomes remain key uncertainties. The delivery of the Victorian ADC and the impact of the Coles Capability Centre on operational efficiency will be critical to sustaining growth and margin expansion. Meanwhile, progress against ambitious sustainability targets and supplier engagement will be closely monitored as the company navigates a complex regulatory and competitive landscape.