Coles crushes FY25 earnings expectations, shares surge 9% to all-time highs
Coles rallied ~9.0% after delivering clean FY25 results that beat analyst expectations across key metrics including EBITDA and dividend.
KEY POINTS
- Coles beat analyst expectations across all major financial metrics including 11% EBITDA growth to $4.05bn and underlying NPAT of $1.18bn versus $1.11bn estimates
- Strong FY26 trading start with sales up 4.9% in first eight weeks, well above consensus expectations of 3.6% growth for the first half.
- Operational improvements include 24.4% eCommerce growth reaching 11.2% penetration, successful absorption of tobacco sales decline, and completion of 60 store renewals.
Investors are aggressively piling into Coles (ASX: COL) after the company delivered a clean FY25 result, with key metrics broadly in-line or above analyst expectations. The stock opened 3.5% higher on Tuesday, and is currently up 9.2% to $22.64.
FY25 at a glance
Coles' earnings strength was largely driven by cost efficiencies and growth in supermarkets, partially offset by a weaker-than-expected performance from liquor.
Revenue up 3.6% to $44.35bn vs. $44.35bn ests (in line)
Underlying EBITDA up 11% to $4.05bn vs. $3.96bn ests (2.3% beat)
Underlying EBIT up 7.5% to $2.22bn vs. $2.10bn ests (5.7% beat)
Underlying NPAT $1.18bn vs. $1.11bn ests (6.3% beat)
Total dividend of 69 cps vs. Goldman Sachs ests of 64 cps (7.8% beat)
Operationally, the supermarket giant hit a number of milestones this year, including:
Customer experience improved across all key metrics (availability, quality, range and checkout experience)
Successfully absorbed 30% decline in tobacco sales (now less than 3% of total sales vs 8% peak in FY19)
Launched 970 new products during the year across key trade events
eCommerce sales up 24.4% to $4.5 billion, with penetration reaching 11.2%
Opened two automated CFCs (Customer Fulfilment Centres) in early FY25
Completed 60 store renewals, opened 8 new stores, closed 4 stores, with total network now 860 supermarkets
The other upbeat metric was the company's FY26 trading update, with sales in the first eight weeks up 4.9% year-on-year vs. consensus expectations of 3.6% growth in the first half.
Analysts first take
"Good, clean result with the one-offs and costs associated with supply chain known. Overall there feels like more optimism in the tone of the release, with a strong start to FY26 and signs of improving sales all supportive of operating leverage beginning to flow through the P&L," noted Jarden analysts this morning.
"[A] net good result, consensus up a touch and lack of caveats around costs, cost of living etc. suggest growing optimism from management."
This suggests the stock will likely receive a large number of target price upgrades, though analysts will likely stay Neutral rated due to valuation.
Earlier this month, Goldman Sachs flagged "Coles is trading at ~23x one-year forward PE, with FY25-27 EPS CAGR of ~11% vs. its long-term PE average of 21.3x. We remain Neutral rated ... despite strong earnings growth outlook."
Coles vs. Woolworths
Coles has continued to expand its returns dominance over Woolworths, now up 22% in the last twelve months.
Coles (red) vs. Woolworths (green) twelve month price chart (Source: TradingView)
Jarden is keen to know if the results suggest that Coles is outperforming, or if Woolworths has lifted too. "Our prior industry discussions suggested Woolworths was trading better," noted the analysts.
