Coles automation investment drives 13.7% earnings growth

Automation strategy delivers measurable returns

Coles Group's multi-year automation investment is producing concrete financial results, with underlying earnings climbing 13.7% and the company achieving A$311 million in cost savings during its most recent financial year, according to details first reported by Proactive Investors.

The Australian supermarket operator's automated warehouse network reached a significant milestone as online fulfillment centers turned EBITDA positive in only their second year of operation. Online sales reached A$5.6 billion, with nearly one in six dollars spent at Coles now coming through digital channels in the opening weeks of the new financial year.

Josh Gilbert, lead analyst at eToro APAC, characterized the results as the clearest evidence yet that Coles' automation program is delivering on its promise, despite a headline profit miss attributed to wage remediation charges.

Earnings growth decoupled from price increases

A notable aspect of Coles' performance was its ability to expand supermarket earnings by 12.2%—more than three times the pace of sales growth—while shelf prices increased just 1.5%. The company also eliminated A$103 million in project and dual-running costs associated with bringing the new automated warehouse network online.

The full-year dividend rose 13% to 78 cents per share, reflecting confidence in the sustainability of operational improvements.

Citi analyst Adrian Lemme described the early FY27 trading update as "better than feared," noting that supermarket sales growth during the first eight weeks remained consistent with the 3.7% growth recorded in the previous quarter. This performance came despite expectations for a more significant slowdown during a competitor's promotional campaign.

Challenges remain in liquor division

While automation gains are materializing in core supermarket operations, the liquor division continues to struggle. Earnings in that segment nearly halved as consumers reduced alcohol spending and competitive discounting intensified. Coles plans to close approximately 30 liquor stores as part of its response, though analysts view the division as a turnaround story still in progress.

Looking ahead, Coles is entering another capital-intensive phase, with expenditure expected to rise toward A$1.55 billion as the company begins the next stage of its investment program. Gilbert cautioned that the retailer will now need to manage rising fuel, wage, and supplier costs after capturing many one-off savings from the automation rollout.

Why it matters

Coles' results demonstrate that large-scale retail automation can deliver measurable returns within a compressed timeframe, providing a potential roadmap for other grocers facing margin pressure. The ability to grow earnings substantially faster than sales while keeping price increases minimal suggests automation creates genuine operational leverage rather than simply shifting costs. For technology vendors and retailers evaluating similar investments, the two-year path to profitability for online fulfillment centers offers a concrete benchmark for return expectations.

These details were first reported by Proactive Investors.