Liquor unit loses fizz as Coles refreshes supermarkets

It plans to open about 45 new supermarkets in high-growth areas over the next two years, a significant step-up from the 13 grocery stores it opened in 2025/26.

Coles "love investing in our stores", chief financial officer Charlie Elias told an earnings briefing on Tuesday.

"They are some of the returning assets that we buy  - very strong returns on capital," he said.

The company has marked 150 supermarkets for major refurbishments by June 2028 as part of its $300 million capital expenditure budget.

The renewals will include wider aisles for team members fulfilling online shopping orders and added car parking for customers to pick up those orders, which in recent weeks made up nearly one-sixth of Coles' total supermarket sales.

But while Coles is growing its flagship grocery business, it is shrinking its alcohol division.

The grocery giant plans to close 30 of about 980 Liquorland stores in 2026/27, mostly big-box stores trading under the Liquorland Warehouse brand formerly known as First Choice Liquor Market.

Coles's overall sales grew nearly three per cent to $45.6 billion in the 52 weeks to June 28, but its liquor business lagged its grocery stores.

Supermarket sales grew by 3.7 per cent to $41.5 billion, while Liquorland sales dropped 3.3 per cent to $3.5 billion.

Sales were up at the convenience-focused neighbourhood Liquorland and Liquorland Cellars stores, which make up 90 per cent of Coles' liquor portfolio, while its big-box network mostly struggled.

"What I would say is, whilst the warehouses have underperformed, the performance is not uniform across all of the stores in the cohort," chief executive Leah Weckert told analysts. 

Coles was optimistic about being able to turn sales at the Coles Warehouse locations it hadn't targeted for closure, she said.

"If you visited any of our stores, you'll start to see some things that we are doing to really differentiate the range in the Liquorland Warehouse from the rest of the network, and we're very encouraged by the early response of that," she said.

The plan includes creating a more integrated food and drink experience and a greater emphasis on supermarket co-locations.

Coles made a net profit of $1.1 billion in 2025/26, up one per cent on the previous year.

But after excluding a $235 million cost related to a court judgment in a Fair Work underpaid wages case, net profit rose a much better 13.7 per cent to $1.3 billion.

The group's underlying earnings - before interest, tax, depreciation and amortisation - rose seven per cent to $4.2 billion.

In the first eight weeks of the new financial year, Coles got off to a good start with sales well ahead of the fourth quarter, but then suffered a "temporary moderation" during rival Woolworths' Ooshies promotion involving squishy Disney figures.

"Following the end of the collectibles campaign, sales recovered quickly, back to levels consistent with the fourth quarter," Ms Weckert said.

RBC Capital Markets analyst Michael Toner said Coles' results were in line with expectations, but he added investors might not like the dent in its 2026/27 sales growth from the Woolworths promotion.

Coles shares closed Tuesday up 4.9 per cent to a two-week high of $23.75.

Coles declared a final dividend of 37 cents, taking the total payout for the year to 78 cents, up from 69 cents in 2024/25.