February’s earnings season to show widening gulf between Coles and bigger rival Woolworths

A major analyst reckons Coles will keep the edge over rival Woolworths, with the supermarket giants tipped to report different fortunes during next month’s earnings season.

Investment bank Macquarie is forecasting Coles’ half-year earnings to hit $1.21 billion, about 12 per cent higher than a year ago, when it reported $120 million in extra sales and $20m in earnings as it benefitted from the 17-day strike at Woolworths in late 2024.

It’s only tipping a 6 per cent growth in half-year earnings for Woolworths.

In a note out this week, Macquarie said growth in comparable sales — which excludes new stores — over the half-year and in the early weeks of the second-half would be a key focus for the market as it assesses underlying market share between Coles and Woolworths.

This will include Coles’ ability to retain customers following the pre-Christmas strike at Woolworths.

Margins will also be a focus amidst concerns of increasing competition in the sector and investments in price to retain market share.

Woolworths boss Amanda Bardwell has been under pressure to turn around a slump in market share, with the Leah Weckert-led Coles and Aldi reporting higher sales growth.

To do this, Ms Bardwell has spent millions of dollars in cutting prices of hundreds of products.

But Coles is also facing some headwinds in its liquor division, with the broader industry grappling with declining alcohol consumption as customers, particularly younger Australians, cut back on discretionary spending and drink less for health reasons.

Coles Liquor is the midst of a simplification program that will include its Vintage Cellars and First Choice Liquor Market chains folding into the better-known Liquorland brand.

“Off-prem alcohol spend remains under pressure, with Coles in early phases of its new branding/pricing strategy,” Macquarie said.

“This will weigh on profitability as the concept is rolled out.”

As for Woolworths, Macquarie is forecasting about $70m of the $95m hit in earnings from the industrial dispute to be recovered in the half-year.

“Industry feedback suggests Woolworths are especially focused on price competitiveness, with sales momentum building in (the Australian food division),” it said.

The first quarter of the 2026 financial year saw Coles’ total sales growth of 3.9 per cent outstrip Woolworths’ 2.7 per cent, suggesting Coles had gained further market share.

Ms Bardwell conceded yet another subpar results.

Coles last October closed in on Woolworths in value for the first time, with the companies separated by just under $600m in market capitalisation.

The gap has once again widened, with Coles at $28.23b and Woolworths at $37.32b.

Woolworths is set to release half-year results on February 25, with Coles reporting two days later.