Coles Group Ltd (ASX:COL)’s years-long investment in automation is beginning to deliver, with analysts highlighting stronger underlying earnings, improved online profitability and a better-than-feared start to the new financial year.
eToro APAC lead analyst Josh Gilbert said the result provided the clearest evidence yet that Coles’ major automation program was paying off, despite a headline profit miss linked to a wage remediation charge.
Underlying earnings increased 13.7%, while the full-year dividend rose 13% to 78 cents per share.
Gilbert said the standout was Coles’ ability to grow supermarket earnings without relying heavily on price increases. Supermarket earnings rose 12.2%, more than three times the pace of sales growth, while shelf prices increased just 1.5%.
Coles also delivered A$311 million in cost savings during the year, while A$103 million in project and dual-running costs associated with the new automated warehouse network dropped out.
Automation starts delivering
The company’s online fulfilment centres turned EBITDA positive in only their second year of operation, while online sales reached A$5.6 billion.
In the opening weeks of the new financial year, close to one in every six dollars spent at Coles was online.
Gilbert cautioned, however, that Coles would now need to contend with rising fuel, wage and supplier costs after capturing many of the one-off savings associated with its automation rollout.
Trading update “better than feared”
Citi analyst Adrian Lemme described Coles’ early FY27 trading update as “better than feared”, saying it should help support the shares following recent weakness.
Supermarket sales growth during the first eight weeks of 1H27 was broadly consistent with the 3.7% growth recorded in 4Q26, despite Citi expecting a more significant slowdown during Woolworths’ Ooshies promotion.
Coles acknowledged some impact from the campaign but said sales trends had since returned to levels consistent with the previous quarter.
Liquor sales also improved from the 2.5% decline recorded in 4Q26, with stronger trends across both convenience and warehouse formats.
Lemme said the stock had been weak ahead of the result amid expectations for a softer trading update, adding that the stronger performance and increased store rollout should support the shares.
Liquor remains the weak spot
Liquor continues to weigh on the broader business, with earnings almost halving as consumers cut back on alcohol spending and discounting remained intense.
Coles plans to close around 30 liquor stores as part of its response, although Gilbert said the division remained a turnaround story rather than a completed recovery.
The supermarket group is also heading into another investment-heavy period, with capital expenditure expected to rise towards A$1.55 billion as it begins the next phase of its spending program.