MELBOURNE, AUSTRALIA
Coles CEO Leah Weckert is harnessing the power of the retailer’s $2bn-plus investment in automated warehouses and fulfilment centres to leap ahead of archrival Woolworths in first-half sales growth, with the best yet to come as its big spend on infrastructure hits its straps in 2026.
Also fuelling its superior growth was disruptions to Woolworths stores caused by a protracted industrial dispute, which kept Woolies’ shelves empty and pushed disgruntled shoppers to Coles. The retailer also received a boost from a leap in demand for the Coles range of private label groceries and new security measures – such as one-way gates – that reduced store theft.
In contrast to the disappointing earnings result issued by Woolworths on Wednesday, Coles beat market earnings expectations, sending its shares above the $20 level for the first time. This probably sent a shudder through the executive ranks of Woolworths (led by CEO Amanda Bardwell), who are now facing a resurgent rival.
WATCH: Inside Coles' Automated Distribution Centre in Sydney's west
Laying the groundwork for Coles’s success in the December half was more than $2bn invested in automated distribution centres (ADCs) and customer fulfilment centres (CDCs). A portfolio of big-spend supply chain projects started by Ms Weckert’s predecessor, Steven Cain, more than showed its worth in the lead-up to Christmas, as Woolworths’ own supply chain issues caused by strikes put extra pressure on Coles.
“We were really pleased how they [the ADCs and CDCs] transitioned and started to ramp up,” Ms Weckert told The Australian.
What we were incredibly pleased with in the half is how we worked in those facilities to respond to the supply chain disruptions we saw in November and December – we wouldn’t have been able to respond as quickly and be as agile if we didn’t have those automated facilities in place.
The best could be yet to come as its two ADCs, one in Redbank, southwest of Brisbane, and the second in Kemps Creek, in Sydney’s west, hit their straps in the 2026 fiscal year to increase Coles’s efficiency and supply chain agility. A third ADC is being built in Victoria.
READ: Coles announces third mega Automated Distribution Centre in Australia
“We are pretty excited about fiscal 2026 – 2025 is definitely what I would call a transitional year where we have to land them, get them open and get them ramped up, and fiscal 2026 is when we would expect the benefits to flow through to the business,” Ms Weckert said.
On Thursday, Coles posted a 2.2 per cent drop in December half net profit to $576m as stronger sales and earnings at its key supermarkets arm was countered by a fall of more than 20 per cent in earnings for its long-struggling liquor arm. However, reported group earnings rose 10 per cent to about $2.05bn, which was 3.8 per cent ahead of market forecasts, and boosted by cost-cutting of $157m and incremental supermarket sales of $120m (and $20m in earnings) from Woolworths’ supply chain woes.
Coles group sales of $23.035bn was up 3.7 per cent and, despite flat sales growth from its struggling liquor arm, with the revenue number was also ahead of market expectations.
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Amid cost-of-living pressures among its shoppers, the Coles range of private label groceries did a lot of the heavy lifting, with revenue from private label goods up 5.1 per cent compared to the prior corresponding period. The company said it saw strong volume growth across the portfolio, particularly over the Christmas period, with Coles Finest being its strongest performing tier with sales revenue growth of 10.2 per cent, as customers entertained more at home.
This all translated into supermarket sales growth of 4.3 per cent to $20.63bn for the December half, easily eclipsing the 2.7 per cent sales growth for Woolworths supermarkets.
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The earnings beat and a healthy uplift in the dividend to 37c a share, up from 36c and payable on March 27, sent Coles shares up 3.5 per cent to $20.38.
Theft rates at Coles, which spiked two years ago, have progressively come down as stock loss (which includes theft and waste) fell 39 basis points. This helped boost supermarket margins, which rose 88 basis points, and which benefited from extra security in stores such as one-way gates installed at 150 sites.
Its liquor arm was a blemish on the results however, as sales rose 0.8 per cent to $2bn, but earnings fell 20 per cent to $67m. Margins fell 88 basis points.
Ms Weckert said while the recent RBA rate cut was “welcome news for many families”, Coles was acutely aware of the ongoing cost-of-living pressures. “Customers are telling us they are cutting back on treats, meat and alcohol, buying more specials and cheaper brands, and looking to cook more meals at home,” she said.
READ: Why the RBA rate cut is a promising start for supply chain transformation | TMX Transform
At its supermarkets in the first seven weeks of the third quarter, revenue rose 3.4 per cent, while liquor stores revenue growth in the first seven weeks was 3.8 per cent.
Coles also announced the retirement of chairman James Graham, who will leave the board on April 30 and be replaced by Peter Allen, the former CEO of shopping centre owner Scentre Group.
This article was written by Eli Greenblat and originally published in The Australian on February 27, 2025.