Billions wiped off Coles stock as it loses ground to Woolworths
Updated ,first published
Bargain-hunting by customers and more fierce competition in the supermarket sector have slowed supermarket sales growth at Coles, sparking a share-price plunge that wiped about $3.5 billion off the company’s market value in early trading.
Shares in the supermarket giant plunged 10 per cent shortly after its latest quarterly results as the company said it expected to incur additional fuel-related costs in coming months. Coles shares clawed back some of the losses in early afternoon trading, and were 6.8 per cent lower shortly after midday.
Coles’ supermarkets sales revenue grew 3.6 per cent to $10.3 billion in the three months to September driven by strong e-commerce growth, partly offset by stronger competition in the grocery sector and a focus on promotions.
Customers remain value-conscious, the company said, cross-shopping across retailers and channels and making the most of promotions and loyalty programs amid cost-of-living pressures.
Coles also said high fuel costs would add to its expenses – as well as suppliers asking for price increases amid a rise in wages, utilities, rent and insurance costs – and that it expected first-half supermarket profits to be flat compared with the prior period.
“Customers are really feeling the pressure on their household budgets,” Coles chief executive Leah Weckert said on a media call following the results.
“They’re really seeking out value now by buying more specials, and they’re using their loyalty points. As we come into Christmas … there will be more meals eaten at home, less going out.”
Weckert also said there were more businesses entering and growing their presence in the grocery market. “There are non-traditional players like the pharmacies, we’ve got specialist online players … and so you have lots of competitors that are really fighting for that customer dollar and shop each week.”
Citi analyst Adrian Lemme said Coles’ guidance of flat profits in the supermarket business compared with Citi’s previous forecast for 8 per cent growth, and that the numbers pointed to a loss of momentum compared with arch rival Woolworths.
“The downgrade appears to be driven by price investment as supermarket sales have clearly been impacted by Woolworths’ pricing strategies,” Lemme said.
Weckert said supermarket prices, excluding tobacco, remained stable at 1.1 per cent in the three months to September, driven by cost increases in dairy and meat.
“However, customers can get great-value prices on a number of items currently in deflation, including grapes and berries, tomatoes, corn and baby broccoli, eggs and vitamins,” she said.
Inflation figures released by the Australian Bureau of Statistics earlier this week showed prices more broadly rose 4.3 per cent in the 12 months to September, pushing the likelihood of another interest rate rise at the Reserve Bank’s meeting next week higher.
Weckert said customers, especially young families and younger demographics, were increasingly using tools to price-check. “We know a lot of our customers are now using AI tools, they’re using price comparison apps, even using social media as forces to try and work out where is the cheapest place to buy things,” she said.
Weckert also noted customer preferences were shifting with more people interested in their health. “Anything in the store which has high protein is a strong seller at the moment,” she said, including meats, canned fish and yoghurt.
“We can’t even keep up with canned sardines demand at the moment,” she said. “We’re also seeing very strong growth in our products which help people take some shortcuts at home, so products which are very easy to do in 10 to 15 minutes in the air fryer.”
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Millie Muroi is the economics writer at The Sydney Morning Herald and The Age covering workplace and economics. She was formerly an economics correspondent based in Canberra’s Press Gallery and the banking writer based in Sydney. Instagram/TikTok: @millie.muroiConnect via X or email.