Table of Contents
Woolworths (ASX: WOW) and Coles (ASX: COL) are set to announce their results for the March quarter on April 30 and May 1, respectively. These reports will provide valuable insight into consumer behaviour, food and beverage pricing, supplier relations, and wage pressures.
Thus far in 2025, both retailers have outshone the broader market, with Woolworths seeing a year-to-date increase of 4.6%, following a previous decline of 8.5%. Coles has surged even more, up 14% to reach record highs. These earnings releases come shortly after the Australian Competition and Consumer Commission concluded an inquiry into supermarket price gouging, finding no wrongdoing by either company.
Woolworths: Significant Metrics and Areas of Interest
UBS anticipates modest single-digit sales growth for Woolworths, yet cautions about potential challenges within its Australian Food and Big W segments. Key figures to monitor include:
- Total Sales: Projected to rise 4.6% year-on-year to AU$17.6 billion, exceeding consensus estimates that forecast a decline of 0.9% to AU$16.6 billion.
- Australian Food Sales: Expected to grow 3.1% to AU$13.0 billion, with like-for-like growth estimated at 2.5%.
- Online Sales: Projected to increase 16% to AU$1.8 billion, representing 14% of total Australian Food sales.
- New Zealand Sales: Forecast to climb 4.3% to NZ$2.1 billion, with similar like-for-like growth.
- Big W Sales: Estimated to rise by 2.3% to AU$1.02 billion.
- 2H25 Guidance: A mid-single-digit decline in Australian Food EBIT is expected.
Investors will be particularly keen to analyse Australian Food sales for indications of consumer trends, focusing on metrics such as item and volume growth, comparisons between online and in-store sales, and the balance of private-label and branded goods amidst promotional activities. Additional areas of interest may include the ongoing trend of grocery shopping over dining out, Woolworths’ response to price rises initiated by suppliers, and its ability to fund promotional activities while maintaining profitability. Factors to consider also encompass projected supply chain costs of AU$70 million in 2H25 and the limited progress on targeted cost savings of AU$400 million.
UBS rates Woolworths as Neutral, raising its target price from AU$30.50 to AU$31.50.
Coles: Essential Metrics and Areas of Interest
Despite softer sales projections, UBS expects Coles to show resilience amidst stiff competition. Key statistics include:
- Total Sales: Anticipated to grow 3.5% year-on-year to AU$10.4 billion, compared to consensus predictions of 4.2% growth to AU$10.5 billion.
- Supermarket Sales: Estimated to increase by 3.5% to AU$9.4 billion, with like-for-like growth of 2.8%.
- Online Sales: Forecast to rise 18% to AU$1 billion, constituting 10.8% of total supermarket sales.
Investors are likely to seek insights on Coles’ automation initiatives, particularly its partnerships with Witron and Ocado, which aim to cut costs and enhance stock availability. Management is expected to clarify how the company plans to balance sales growth with margin expansion in light of supplier price pressures and shifting consumer behaviours, such as increased liquor consumption at home. UBS is optimistic about Coles’ potential for cost savings and efficiencies driven by automation, prompting an increase in its earnings forecasts for FY25 and FY26 as supermarket margins improve. Coles’ forward price-to-earnings ratio stands at 22.7x, aligning with market expectations and closing the historical valuation gap with Woolworths.
UBS maintains a Buy rating for Coles, raising the target price from AU$22.35 to AU$23.50, reflecting higher earnings expectations for FY25-26.
Market Context and Performance Trends
In 2025, the S&P/ASX 200 Staples Index has significantly outperformed, rising 4.7% year-to-date, contrasting with a 1.9% decline in the broader S&P/ASX 200. If Woolworths and Coles deliver strong earnings alongside effective cost management and margin expansion, the sector could witness increased investment interest as markets gravitate towards defensive assets.
Coles has outperformed Woolworths over the past 18 months, with this trend gaining momentum following Coles’ August 2024 FY24 results, which addressed various challenges such as shrinkage, supply chain disruptions, and theft, alongside momentum from its “Simplify and Save” initiative. In comparison, Woolworths has faced difficulties, with its stock price dropping after a series of disappointing results:
- October 2024: Reduced guidance for first-half FY25 by approximately 10% below consensus due to a shift towards lower-margin products by consumers.
- February 2025: Reported a 20.5% decrease in half-year FY25 net profit to AU$739 million, missing expectations by 4%, and a 17% interim dividend cut to 39 cents per share, slightly below consensus.
Woolworths is currently trading at its lowest valuation ratio relative to Coles since Coles’ listing in 2019. Despite Woolworths having a one-year forward P/E ratio of 23.7x slightly above Coles’ 22.6x, its historical attractive valuation juxtaposed with recent earnings struggles presents mixed signals for investors, hinting at either a lack of appeal or an opportunity sparked by its discounted valuation.
