COLES flagged on Friday a sluggish start to the second half of fiscal 2026, citing mounting competition from larger rival Woolworths as it steps up efforts to regain market share, sending shares of Australia's second-largest grocer down 8 percent.
Shares of Coles tumbled up to 8.3 percent to AU$20.340, marking their worst session since March 31, 2020. The stock fell to its weakest point since July 30.
Coles said sales at its Supermarkets division rose 3.7 percent in the first seven weeks of the third quarter, missing market expectations of 4.3 percent and trailing the 5.8 percent growth reported by larger rival Woolworths' Australian Food business.
"Trading update suggests Woolworths has regained sales leadership, but Woolworths' strong share price performance suggests the market has already worked that out," analysts at Jefferies wrote.
Shares of Woolworths soared 13 percent on Wednesday after the country's largest grocer reported forecast-beating first-half profit and raised its annual outlook. They were trading nearly 1 percent down in early trading on Friday.
Coles and Woolworths, which together ring up two-thirds of Australian grocery sales, have been locked in an intense battle for market share, using discounts and marketing firepower to appeal to cost-conscious consumers.
"We know value remains front of mind for our customers," Coles CEO Leah Weckert said.
"We expect the market to remain highly competitive."
Coles recorded a one-off charge of AU$235 million during the six-month period ended Jan. 4 in relation to additional remediation expenses after the court found it had underpaid thousands of workers in September last year.
That crimped its post-tax profit attributable to shareholders, which slipped 11.3 percent to AU$511 million ($363.17 million) for the six months ended Jan. 4, missing the Visible Alpha consensus of AU$674.5 million.
On an underlying basis, profit rose 12.5 percent to AU$676 million, buoyed by a 14.6 percent surge in earnings from its Supermarkets division as shoppers hunting for discounts and value offerings lifted sales.
However, earnings at the Liquor division plunged 37.3 percent in the first half to AU$42 million as sales fell 3.2 percent, weighed down by weak demand and stiff competition. Sales were down a further 2.5 percent in the first seven weeks of the current quarter.
The grocer announced an interim dividend of 41 Australian cents a share, higher than the 37 cents declared last year.