Today, Coles $COLES GROUP LTD(COL.AU)$ , one of Australia’s two supermarket giants, released its FY2025 results. The solid and resilient earnings sent its share price soaring more than 8%, breaking through the record high it set back in May. So why did this set of numbers spark such a big move? And now that the stock has jumped, what does this mean for Coles’ investment outlook?
FY2025 Performance
For the year ended June 2025, Coles reported revenue up 3.6% (on a 52-week comparable basis).
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Supermarkets: Sales grew 4.3%, or 5.7% if you strip out the ongoing drag from tobacco. Online sales surged 24.4%.
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Liquor: Revenue edged up 1.1%, with online sales growing 7.2%.
On profitability:
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Adjusted EBITDA rose 10.7%, while adjusted EBIT climbed 6.8%. The supermarket arm delivered EBIT growth of 8.3%, with margin expansion of 21 basis points.
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The liquor business remained under pressure, with EBIT down 10.1% due to a weak market, but the second half showed a clear recovery as simplified operations drove a 6.8% rebound in EBIT.
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Adjusted net profit grew 3.1%, held back by costs linked to Coles’ new Automated Distribution Centres (ADC) and Customer Fulfilment Centres (CFC).
Coles announced a 32c final dividend, bringing the full-year payout to 69c per share, slightly higher than last year’s 68c.
Source: Coles FY25 Earnings
Early signs in FY2026 look promising: in the first 8 weeks, supermarket revenue rose 4.9%, and ex-tobacco sales were up 7%. Liquor sales were flat, but management expects improvement as cost-of-living pressures ease. The new “Simply Liquorland” format will roll out in Q3, aiming to lift profitability — though it will come with around A$20m in one-off costs.
Capex is set to rise to A$1.2bn, focused on store upgrades, digital platforms, and completing the ADC/CFC rollout. Importantly, FY2026 will be the first year Coles sees the full benefits of its automation strategy, without the drag of duplicated transition costs.
Source: Coles FY25 Earnings
Strategic Transformation
Coles $COLES GROUP LTD(COL.AU)$ has been investing heavily in its ADC and CFC supply chain systems — part of a broader digital and automation push, echoing strategies used by global players like Walmart $Wal-Mart(WMT)$ .
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ADC (Automated Distribution Centre): Built in partnership with Germany’s WITRON, these high-tech warehouses (already live in Redbank, QLD, and Kemps Creek, NSW, with Truganina, VIC under construction) use robotics and smart packing to prepare goods in store-shelf order. This boosts accuracy, cuts manual labour, speeds up restocking, reduces inventory build-up, and ultimately drives cash flow efficiency.
Source: Coles FY25 Earnings
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CFC (Customer Fulfilment Centre): Partnering with UK online retail tech firm Ocado, Coles has built facilities dedicated to e-commerce. Robots pick and pack orders for direct-to-home delivery. The result? Online “perfect fulfilment” rates have doubled, and online coverage expanded by 33%.
Source: Coles FY25 Earnings
These projects have weighed on earnings during the transition, but from FY2026 onward they are expected to unlock meaningful efficiency gains and reshape Coles’ cost structure.
Liquor Business in Transition
Tobacco continues to be a long-term drag. Liquor is more nuanced — pressured today, but with a turnaround strategy underway.
Coles is consolidating Vintage Cellars and First Choice Liquor Market under the Liquorland brand, creating two sub-brands, Liquorland Cellars (premium focus) and Liquorland Warehouse (value-driven)
All stores will move to a unified look and feel, consistent promos, product sets, and a Price Match Promise. Pilot stores already show encouraging signs: brand awareness up 16% and much stronger repeat visits.
Yes, this rebrand will mean upfront costs in the next few years, but longer term it could significantly lift efficiency and brand power in liquor.
💡 Investment View
After the rally, Coles is now trading on around 27x earnings — about 10% higher than the global supermarket average. That said, it’s still below Walmart $Wal-Mart(WMT)$ on 36x and Costco $Costco(COST)$ on 53x.
Why investors are still upbeat:
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Coles holds a quasi-monopoly position in Australia,
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Offers a stable 3%+ dividend yield,
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And is about to start reaping the automation efficiency dividend from its ADC/CFC rollout.
Put together, Coles looks like a high-quality defensive growth stock, capable of delivering steady returns that can beat the market over the long haul.
Invesight Viewpoint
This result tells a bigger story: Coles is evolving from a traditional grocer into a digital, AI-enabled retail operator.
Yes, the stock isn’t cheap after an 8% pop. But with its entrenched market position, reliable dividends, and efficiency gains just around the corner, the long-term investment case remains compelling.
The question now: can Coles build on this momentum and keep breaking new highs? Investors may soon get the answer — not in the aisles of its supermarkets, but in the algorithms running its supply chain.
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