Coles Group (ASX:COL) reported mixed results in its first quarter of FY2025, highlighting growth in some segments while grappling with tightened consumer spending in others. The company posted a 2.9% rise in total group revenue to reach $10.55bn for the 13 weeks ending 29 September 2024. Coles Supermarkets led the growth, with sales climbing 3.5% to $9.5 billion. CEO Leah Weckert attributed this increase to Coles’s value-focused campaigns, noting that inflation was kept low in key categories like meat and dairy as part of its strategy to support customers dealing with cost-of-living pressures.
The Liquor segment, however, remained flat year-over-year at $851 million, as discretionary spending continued to fall. Analysts noted that while the segment showed resilience, it failed to meet some market expectations, partly due to a transition away from lower-margin bulk sales and a shift to exclusive branded products. The company is also rebranding some liquor stores, bringing them under the Liquorland banner to streamline its offering. Analysts are watching to see if these changes will better align with shifting consumer preferences in coming quarters.
One highlight was Coles’s eCommerce growth. The quarter saw a 22.4% increase in online sales, with eCommerce penetration in supermarkets rising to 10.8%. The company is enhancing its digital offerings through app and website upgrades, including personalised promotions and shoppable recipes via taste.com.au, which have significantly boosted customer engagement. The transition of next-day home deliveries to automated Customer Fulfilment Centres (CFCs) in Melbourne and Sydney has improved order accuracy and availability.
Despite positive indicators, Coles’s investments in automation and digital growth come at a significant cost. Capital expenditures have risen as the company invests in its automated fulfilment infrastructure and expands inventory to meet festive demand. Coles recently announced plans to build a third automated distribution centre in Victoria, expected to increase FY25 capex to approximately $1.3bn. These moves are seen as essential to supporting Coles’s market share and operational efficiency, yet they could weigh on short-term margins as the costs are absorbed.
Shares in Coles are trading 0.2% higher at $17.74.
