I would now like to hand the conference over to Leah Weckert, Chief Executive Officer. Please go ahead.
Good morning, everyone, and welcome to Coles' first quarter sales results for the 2027 financial year. Before I begin, I would like to acknowledge the traditional custodians of this land on which we meet today, the Wurundjeri peoples of the Kulin Nation. We acknowledge their strength and resilience and pay our respects to their elders, past and present. I am joined in the room today by Charlie Elias, our CFO, Matt Swindells, our Chief Operations and Supply Chain Officer, Anna Croft, our Chief Commercial and Sustainability Officer, Michael Courtney, our Chief Customer Experience Officer, and Claire Lauber, our Chief Executive of Liquor. I will start with a few comments on the quarter before we move into questions. We delivered supermarket sales growth of 3.6% in the first quarter, consistent with the growth achieved in the fourth quarter of FY26. This represents a two year growth rate of 10.7% ex-tobacco.
This was achieved in a highly competitive market, with customers continuing to manage cost of living pressures and shopping more deliberately across retailers and channels. Against this backdrop, during the quarter, we increased our investment in Coles Simply and our Everyday Value ranges, and customers continued to make greater use of our promotions. Engagement with Flybuys also strengthened, with swipe rates increasing and the value of points redeemed up 16%. We also continued to see strong momentum in some areas of the business where we have been investing for growth. E-commerce was a standout, with sales increasing 22.9% and penetration reaching 15.7%, led by our CFC fulfilled and immediacy channels. Our Exclusive to Coles portfolio also continued to perform well, growing ahead of total supermarket sales. We launched more than 80 new own brand products during the quarter, and Coles Finest remained our strongest performing tier, with sales growth of 13.3%.
As discussed at the full year, we are continuing to invest in our store network and customer experience. We opened eight new supermarkets during the quarter, which is almost as many net new supermarkets as we opened throughout the entire year in FY26. We also completed seven renewals and are expanding our online capacity and have commenced the rollout of electronic shelf labels. In liquor, sales declined by 1.3%. Our convenience portfolio remained in positive growth, and we saw improving trends across our warehouse stores, which is encouraging. Customer metrics also improved, with NPS reaching an all-time high, reflecting continued improvement in the in-store and online experience.
Overall, there are areas of good momentum, but we recognize that in this competitive and value-focused environment, our sales momentum is not where we would like it to be, and we are taking action to sharpen our offer for customers and improve momentum as we come into the all-important Christmas trading period. We are stepping up our investment in value where it matters most to our customers and making that value clearer and more visible. As an example, last week, we relaunched our Everyday Price program, where customers can count on six months of price certainty, and we are already seeing encouraging early signs from this.
I am sure you have also noted from our release this morning that as a result of the targeted investments we are choosing to make in our customer offer, sales momentum, which is not in line with where we would want it to be, together with the higher fuel costs we have seen over the last two months, we are now expecting supermarket EBIT for the H1 to be in line with H1 of FY 2026, noting that we are cycling EBIT growth of 14.6% last year. In liquor, the sales revenue decline in the early part of the second quarter was broadly in line with Q1. We are encouraged by momentum in our convenience format and the early customer response to our integrated food and drink offer, while remaining focused on improving overall performance.
We know customers are under pressure, and we are confident that we have a strong plan in place to build their trust over this period for the long-term benefit of the business. With that, let us move into questions.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star then two. If you are using a speakerphone, please pick up the handset to ask your question. We ask that questions be limited to one per person. Please rejoin the question queue for any follow-up questions if time permits. The first question today comes from Peter Marks from Goldman Sachs. Please go ahead.
Morning, Leah and team. I am just curious, could you give us a bit more color on what has happened in October? How much has that slowed, and I guess, how are you thinking about the second quarter? Because I think your comps are about to get materially easier into November, December. Thanks.
Thanks for the question, Peter Marks. Well, as we have said in the outlook, the sales growth as we have gone through October, it has moderated versus Q1, but I would describe it as remaining resilient. We are not in a situation here where it has gone down into the tooth. It is still very resilient. And we have got a strong plan in place as we head into the back end of the year, which is giving us some cautious optimism that we will be able to get that sales momentum moving up. I think what we saw in October is that we do have a consumer that is very cautious. We did see sentiment impacted by the interest rate rise that came through, and so we know they are continuing to manage their budgets very closely.
They are seeking out more value, buying on specials, using more digital tools to help them to identify where the cheapest price is. And we are seeing them engaging more strongly with loyalty programs. So Flybuys has seen some real step-ups in terms of swipe rates and higher opening of email offers. As we think about heading into the back end of the year, there is really three big things that we are focused on to give us that optimism around the improvement in the sales momentum. I think the first one would be that we are stepping up investment in value, but alongside that, also strengthening the communications that we have around value in store. So we currently have got about 4,000 products on Every Day Price, and we did relaunch that program last week, which has meant there is a new ad in market.
We have got more point of sale around the store, and we are more clearly calling out now the products that are on Every Day Price. And alongside that, we have introduced a new mechanic, which is lower everyday prices, which is actually a price drop and then a commitment to hold it at that new price for at least six months. And then the second big area that we are really focused on is making sure that we land these Christmas, the customer moments as we head into Christmas. So if you go into our stores at the moment, you will see that Halloween is very much alive in store. There is a lot of fun around things like the pumpkins, but there is also great value to be had in areas like half-price share packs and the like. And then we have got Black Friday, Cyber Monday ahead of us.
We've also got then Christmas, and we have got our biggest Christmas range that we've rolled out this year, including 200 products under AUD 10. Then I think the third area that we're really focused on as we come into the back end of the year is relentlessly focusing in on execution. As part of that's a focus on availability and making sure that the investments that we've made in things like the ADCs and store tech is really getting us into the best shape that we can for that Christmas trading period.
Great. Thanks, Leah.
Thank you. The next question comes from Tom Kierath from Barrenjoey. Please go ahead.
Morning, guys. Just a question on the price investment and how to think about that annualizing through the H2. Is the way to think about, I guess, the change in outlook that the price investment is all in the second quarter? In other words, there wasn't much in the first quarter, and then effectively, we should kind of double that investment for the H2? Is that reasonable to think of it like that way on the price investment side?
Tom, thanks for the question. It's Charlie here. From our perspective, what we've given you today is really a perspective on the strong plan that we've put in place in terms of value and investment and communicating that value, as Leah outlined earlier in relation to the H1. We have not given any guidance in relation to the H2. We believe we've got some strong plans in place to get through this festive season and the like. We haven't sat here to give you second-half guidance in any form in that regard.
Can I clarify then that the price investment is all related to the second quarter, and there wasn't any incremental investment in the first quarter?
Again, we are taking action on value both in the second quarter. We have obviously had value investment in the first quarter as well, but we are taking action in the second quarter, including, and not only just the actual value investment, but how we are communicating that value through the mechanics that Leah has outlined earlier.
Tom, I think it would be fair to say that every year, we put a plan in place around what value investment would be. So, coming into quarter one, we were taking actions in line with that plan. For example, we made some investments into the Coles Simply range to sharpen that proposition at the value end of the range. But what we're indicating now is that we're just going to be doubling down in a few areas as we come into the back end of the year, really to get that sales momentum going in an environment which is very competitive at the moment.
Understood. Thanks, guys.
Thank you. The next question comes from Bryan Raymond from JP Morgan. Please go ahead.
Morning. Just wanted to reflect on maybe the post-Ooshies period, so the five week exit run rate for you guys, and then October. I know it is a bit rough, but on my estimates, I am estimating you guys are about 250 basis points below Woolworths on sales momentum at the moment. I just want to understand the rationale, or it is not the rationale, the drivers of that, and how you are addressing it. You are obviously calling out value, which is important, but I do not necessarily think your price is necessarily out of whack with Woolworths. So, I just wanted to understand if you think there is an execution issue, if there is a problem either in-store or online, or just really diagnosing that underperformance of late.
It has only been a few months, I understand, but I am just trying to work out going forward if that is something that is addressable without major price investment. Thanks.
Yeah, thanks for the question, Bryan. I think first of all, if we just take a step back, I think it is worth noting that we've had very consistent sales growth now for many periods on periods. Actually, when you take Q1, we're at a two year growth rate of 10.7%, which is very strong. There definitely is a factor which is playing in here, which we have had strong performance for an extended period of time now, and we're still delivering consistent growth over the top of that. The market is very competitive, and I think it would be fair to say during this period, we have been transitioning away from Down Down, and that has probably, well, it has limited the amount of communication that we've been able to do around value in store. As I said, we relaunched Everyday last week.
That is giving us a new mechanism and a new set of assets that we're able to communicate in store. If you go in and see that now, you really are seeing that very prevalent in the store. We're much more overt in calling out Everyday products on the shelf. We've introduced things like Value Bays, very strong ends around Everyday as well. I think having that in place now gives us a lot more confidence around the voice that we have around value, and obviously, that's very important as we come into the back end of the year.
Just the Hi-Lo promo program, like, that's the other important piece of it. Is there any change there? I've heard some multi-buys might be changing. Is there anything going on there that might be contributing to the underperformance?
Well, actually, during Q1, we saw promo contribution step up a bit. As we were transitioning away from Down Down, that promo contribution played a larger role in how customers were accessing value in the store. We would expect that probably starts to normalize now as we see more activity in the Everyday space as we go forward. I wouldn't be calling promos out as something that we're concerned about.
Okay. Thank you.
Thank you. The next question comes from Shaun Cousins from UBS. Please go ahead.
Thank you. Maybe just further on the value perception issues there. With your investments, do you believe that, given that you know your price is probably better than we can ever estimate, do you believe that you need to drop prices to be lower than Woolworths are, or where are you now relative to Woolworths? Is it really more meeting the market, or you want to establish a lower price point? How much of it do you think your value issues are price reality relative to a poor communication and a price perception issue there, please?
I think I would describe the actions that we're taking today as we are taking a targeted set of actions here to get sales momentum building again. We have moved early on making the decision that we need to do that. As I said, the market is competitive, and as we have transitioned out of Down Down, there has been some pressure on price indices, but it's not something that we're calling out as a problem here. What we are saying is we're going to make some targeted investments in the right places as we come into Christmas because we know that consumers are very value-conscious. It's likely they're going to be even more value-conscious as we head into Christmas, and so doubling down on value at the moment makes good sense for attracting them into the store because they are checking prices week in, week out.
And so, making sure that we've got the right pricing and the right promotions on lines that we know are going to be featured as big baskets as we come into Christmas is really key.
So, sorry, Leah, that suggests it is more of a, you need to sort of communicate it, that there is some select price investment you are making, but it is more of a, you had the wrong mechanism with Down Down and Everyday will help, and you need to communicate it better. Is that the right way to read it? As opposed to, we just need to drop prices dramatically. It is more around, if you had to weight it would be more in how it is communicated and messaged to the consumer.
Yes, I think that is right, Shaun. It is a targeted set of investments, and then it is stepping up the communication that we are doing because we now have confidence behind the set of mechanics that we can communicate to consumers, and that we are confident around sort of the compliance guardrails that we have around those.
Great. Thank you.
Thank you. The next question comes from Craig Woolford from MST Marquee. Please go ahead.
Morning, Leah and team. Can I just get some perspective on the dynamics that are leading to softer sales trends? I mean, is it items in the basket or number of transactions? Also, any comments on different categories within the store, fresh, everyday, impulse, how some of the categories are performing?
Yeah, I would probably actually say the biggest differential that we are seeing at the moment is probably from a channel perspective. The online growth for us during the quarter was very strong, and I might get Michael to comment a little bit on that. I think where we would say we are not happy with momentum at the moment is in the bricks-and-mortar sales. As I have just talked through, we have made some significant changes in terms of how we are communicating value in the store across the board, in the bricks-and-mortar space, that we have been very pleased with the early response that we have seen to that. Michael, did you want to talk a little bit online?
Sure. Thanks, Leah. As Leah mentioned, e-commerce growth for the quarter was very strong. I think what is particularly pleasing in that is that the growth is being led by Uber and CFCs, which are two differentiated positions in the market, and we think they are giving us a clear growth advantage at the moment. I think the other thing that I would add, as we continue to grow in sales, we are continuing to improve the profitability of the e-commerce business as well, which means our profit is growing ahead of where our sales is.
And maybe just to round out, Craig, I think in terms of customers, we have been seeing them put more retailers into their repertoire every week. I think we saw that sort of come off a little bit as we came into Christmas last year, but this year, ever since the start of the Middle East conflict, we have seen that as a really sort of prevalent consumer behavior. So, we are continuing to see really good levels of customer count coming through the store, but we are seeing a lot more splitting of baskets. So, with those targeted investments that we are looking to put in place, that is really about making sure that those high-volume SKUs that really form the core of the basket, that we are the destination for coming to buy those.
Thank you. And just on the fresh, how did fresh perform?
Yeah. In the release, we did note that fresh outperformed rest of store, led by meat and dairy, so we saw strength in those two categories. Anna, did you want to make any comments on what we saw in those phases?
Yeah. What we have seen is actually fresh continually growing, and actually what is pleasing is NPS really accelerating in terms of quality and value metrics across the board. Well, we have seen meat, through really targeted investments for some time, has been accelerating ahead of total store growth, and that is important for us because it is the centre of plate and is the driver of store choice as well. So, we continue to double down on making sure we have got the best quality and unbelievable pricing in there. Dairy continues to be strong, and the protein trend remains. We have faced some availability challenges that have been kind of more structural and across the market in dairy, but we are starting to see those come to an end, and actually, we are confident we can accelerate that growth further. And actually, produce has been strong in terms of quality metrics coming through as well.
We are pleased overall with fresh, and we will continue to accelerate as part of our transformation programs in each of those areas as well.
Thanks for that, Anna. Thanks, Leah.
Thank you. The next question comes from Ben Gilbert from Jarden. Please go ahead.
Good morning, team. My question, I am just interested in what has changed over the last couple of months, and I suppose if I then play out in terms of where we are looking over the next six, it feels like Woolworths are only really just starting to bank the benefits of CLR because they take a while to play through, and there is obviously some big asks because we have sort of seen that in the press. It feels like they are going to continue to lean pretty aggressively into price and LSPs. You have Amazon that is flying, and then you have a situation where you have sort of tobacco, these sorts of things that maybe is going to help some of the indies, et cetera. I am just interested in what has changed, and do you think the amount of money that is sort of been put into price at the moment is enough?
Are you getting a lot of support from suppliers to help fund over and above to really get some price leadership back in the market? I know there's a bit in there, but I'm just trying to play out what's happened and how this step change is looking over the next six to 12 months.
Ben, why don't I just quickly touch on where we are with suppliers? I think what I'd say is we're very confident in the support we are getting from suppliers. We take a very collaborative approach with them, and we have long-term strategic sourcing programs now that have been running for a couple of years, and they are successfully running. Actually, all the joint business plans we put together with suppliers in terms of acceleration of each of our lines are coming through as we've planned. Actually, what we're increasingly focused on is building long-term plans with suppliers to drive accelerated growth and volume together and mutual profitability. We're also working very end-to-end to take out cost and complexity out of our system so that together we can reinvest these efficiencies into value for customers.
What I would say, there's been a big change in recent months. We've seen a real appetite from suppliers to lean in with us, and that's not just in the near term, but on a long-term plan to truly accelerate volume and growth together. So, we feel very positive about the future and the support we're seeing today, and I'm very energized about the opportunity of the way in which we are working with suppliers presents moving forward.
The step change in terms of last month or so is that there's been a much bigger push around the Lower Shelf Prices that Woolworths is doing, because Aldi's still pretty benign. I think, in terms of growth out there. It really only seems that Woolworths that's changed.
In terms of the supplier sentiment, are you saying in terms
Well, just in terms of the competitive backdrop. The terms in the competitive backdrop is why October should have necessarily softened, because obviously things picked up post-Ooshies. I am sorry to keep pointing this back to Woolworths, but obviously their numbers are out this week. Then it is dipped again in October. I am just wondering, is there a step change in promotional intensity? Do you think the market growth has slowed, or do you think you have seen a share?
Yeah, the market is very competitive, and that is across every competitor we are seeing there. That is coupled with the customer behavior. We are seeing that customers are seeking out greater value. In some categories, they are trading down, and we are making sure that we really deliver against that value-conscious consumer. Where we need to rework plans and put more investment into core lines, we are absolutely doing that. I would say competitive market coupled with the consumer sentiment has been where we are focusing our responses.
As we have already outlined, the step-up in value communication as we come into Christmas, we think is an important part of that.
All right. Thank you.
Thank you. The next question comes from Adrian Lemme from Citi. Please go ahead.
Oh, hi, Leah and team. The market had about AUD 80 million of EBIT growth in the H1 in its forecast. I am just trying to understand if we can understand the rough mix of this downgrade. You would have obviously the deleverage that you have talked about, particularly in stores, which looks like it is in negative growth now. You have mentioned the fuel impact and obviously the targeted price investment. Are you able to give any color on what the bigger drivers are in this downgrade, please?
Yeah, Adrian, thanks. It is Charlie. Adrian, from our perspective, if I am to be really as clear as well, in terms of the drivers of margin and drivers of EBIT, they have not changed. In terms of our SSI program continues, and it has continued strongly, and we are actually pretty confident it is going to deliver well over AUD 1 billion, which will benefit both margin and CODB. We did call out good growth in Coles 360 in the quarter, and we have got some great plans to continue to grow that strongly. We do note, and you will note, that we continue to work with our supplier partners in terms of strategic sourcing and some of the better buying that Anna outlined a little bit earlier.
What we really called out today, if you think about the three elements that we have called out today, really there is an element where sales have not been in line with what our expectations are, so we have been really clear on that. There is an element of, if you like, the sales flow through into EBIT. Secondly, we are announcing, and we have announced, some targeted investments in areas to deliver value to the consumer, to actually meet the consumer where they are at. That has been really important. The third thing is around fuel, and the element around fuel is, you recall back in Q4 last year, we called out fuel would be about a AUD 15 million sort of impact for the half, for the H2 of FY 2026.
What we are saying here in terms of fuel, folks, just want to throw a number at it is slightly higher than that AUD 15 million that we spoke about. What is really important though look, I think in terms of the guidance that we have given today, really it is about the three elements that I have spoken about. I think it is worth noting, Adrian Lemme, when we look at the two-year basis, I mean, EBIT last year grew by 14.6% in the H1. So, we are cycling strong earnings from the half. Looking out on a two-year basis. I mean, we are talking quite strong earnings over that two years.
Thanks, Charlie Elias. Can I clarify my understanding on the in-store sales? Because the growth slowed to 0.6% in the first quarter. Am I right to believe that it is probably flat to slightly negative now, given the slowdown in overall trading and that Coles Online is still been strong?
Oh, look, as we have said, your sales are not where we like and certainly not in line with our expectations. In-store sales specifically, obviously are down. I would not go into the negative territory, but I think, as we said earlier, and Michael Courtney spoke to it, we have seen really strong growth in our online channels, and that has been important, and more importantly, increasingly profitably.
Thanks for that.
Thank you. The next question comes from Michael Simotas from Jefferies. Please go ahead.
Thanks very much for taking my question. Look, it sounds like you have a plan ahead to try to address the lack of sales momentum. What do you do if you put these investments into price and work on communicating value, but your sales momentum does not turn? Because the operating deleverage in the business can be devastating, and we will see the impacts of that in the H1. What do you do if you cannot turn momentum? Do you just need to invest more?
I think firstly, I would say that we have a degree of confidence that the plan is going to get us to a place where we need to be in terms of improving that sales momentum as we come into Christmas. I would probably say we have acted early here, right? We have recognized over the last few weeks that we are not comfortable with where we are at, so we are moving quickly to take action. We are not allowing it to get embedded, which is quite often more difficult than to get it to turn. I would say from a risk around deleverage is cost control is one of our very strong muscles that we have built over time. We have continued to take actions as we have gone through this quarter to further tighten our control around cost and to put more into SSI.
That is a constant always on for us to be asking, how does that equation work? That is really why when Charlie outlines those three areas, they are very specific in terms of what is leading to us giving the EBIT guidance today, which is just around sales flow-through because we are not where we want to be. It is some targeted additional investment into value and really doubling down on that at a time when we know it is going to meet customers where they are at and doing that early. The third piece is just the fuel volatility that we have seen. We will continue to keep a very close eye on costs that is coming through, and we have an SSI plan for this year, which really helps us to offset those increases that we have seen in things like wages and energy.
Yeah. Michael, it is worth noting as well that we are a healthy margin business. We are a healthy margin business, and together with that cost control. I guess, allows us to remain highly competitive in this market and, yeah, as I said, meeting the customer where they are at in respect to value. I think it is in that position that we give guidance today.
Okay. Thank you.
Thank you. The next question comes from Caleb Wheatley from Macquarie. Please go ahead.
Morning, Leah and team. Apologies to harp on the value investment piece, but just keen to explore how we should think about price inflation from here. I know they don't have to be the same, but there's quite a meaningful spread between you and your largest competitor on average price movement. Appreciate the comments on working together with your suppliers, but what are you hearing from them in terms of their inflation or price asks, and how is any of that feeding into these thoughts on the targeted investments?
Yeah. I mean, the first thing I'd say is the two measures that us and our major competitor use to talk about inflation are quite different. Ours is not an average price movement measure. Ours is an inflation calculation, which is more akin to what the ABS would use. I do note that the ABS inflation number is positive. That would be the first thing to note. I think the way to look at that is actually in terms of the trajectory and the direction of channel and shifts quarter on quarter is probably your best indication of how that's traveling. In terms of the outlook for inflation, Anna, did you maybe want to cover that off?
Yeah. Why don't I probably give a bit more color around what is happening at the moment or what we've seen in the last quarter. As you would have seen, our inflation remained relatively steady at 1.1%, but there is a number of different variables underneath that. We saw both dairy and meat in inflation. We saw moderating deflation in produce versus the prior period. Actually, we've seen continued deflation in non-food, and that coupled with investment we've made is driving some of the deflation. What I would say, there are some big areas that have been in deflation, whether that is fruit across both grapes and berries. We've seen lots in veg, including corn, baby broccoli, and all the soft veg. Dairy is coming through from an eggs perspective year- over- year.
But what I would say, looking ahead, we do think there is some inflationary pressure, but we are going to manage those very carefully, and we're very conscious around where the customer is at from a value perspective at the moment, and we'll be very purposeful around how do we manage that. We're working very hard with our supplier base to mitigate inflation and to manage that cost flow coming through. That's how we're looking at it at the moment.
But based on the potential inflation coming from your suppliers, is there an implication that some of that's going to be part of this targeted reinvestment?
Sorry, you broke up a little bit. Caleb, can you just repeat that question, please?
Apologies. Yeah, just asking on that potential price inflation coming through from the supplier perspective. Is there an implication that some of that's going to be, for lack of a better phrase, worn by Coles to manage the value proposition if these price increases are coming through from your broader sense?
No, as ever, we would work to find ways of thinking about the right products to put investment behind, and obviously, our suppliers are working with us to make sure we mitigate that and actually will be very targeted around the right lines and doing that in partnership with them as well. And our suppliers, as I said, are really coming to the table to support us in that and looking for accelerated volume and doing that both in the short term and the near term, and they're looking for collaborative long-term partnerships that gives acceleration.
I think probably also worth saying that we had a real peak in cost price increase requests coming through in Q4, and that has moderated back quite substantially in Q1 and really broadened out in terms of the drivers. Less on fuel and more on areas like wages, insurance, overheads, and the like.
Oh, that is helpful. Thank you.
Thank you. The next question comes from Phil Kimber from E&P . Please go ahead.
Hi, guys. I just wanted to I know you called out the high profit base in the H1 last year. I think you said, you know, 14%, and if you go and look at it, your GP margins expanded pretty aggressively there. With the benefit of hindsight, do you feel like perhaps you got the balance between customers and shareholders slightly wrong, and this is now sort of amending that? I know it is sort of a hard question, but just wanted to get your thoughts on that. Thanks.
Yeah, thanks for the question, Phil. I think we're comfortable that we got the balance right in FY 2026. We definitely were very pleased with sales growth. We grew ahead of market, which is always our aspiration, and we were able to deliver to the bottom line some significant step changes because of the investments that we had made over time. I mean, what we're calling out today is taking early action on what we have seen over the last quite short period. It's a competitive market where we have to be agile to make sure that we're, first of all, having an eye to where the customer is, and the customer has become a lot more cautious over the last couple of months.
You know, given where we might be next week in terms of another rate rise, we don't expect that to go away as we head into the back of this year. Doing the right thing for customers in this environment is good long-term health of the business. Our view is acting early, as I said before, so that we don't get into a situation where it's embedded is important for us to do. As Charlie called out, we are in a healthy margin position, and we've always said that we will remain competitive in the market, so we're taking the right action now to ensure that that's the case.
Great. Are you saying that you'd sort of become uncompetitive, or it's just more at the margin and the targeted sort of categories you talked about, the high-volume lines? That's really where the focus is going to be?
Yeah. I mean, as I said to Shaun before, this is really about getting sales momentum going. We want to be growing above market, so this is about doing some targeted investments and doing a much better job of how we're doing the communication around it.
Great. Thank you.
Thank you. The next question is a follow-up from Tom Kierath from Barrenjoey. Please go ahead.
Thanks. Just on the acceleration in the number of stores that you are rolling out, I noticed you did eight in the quarter. How should we think about cannibalization from those stores? It has been a while since you have had this sort of run rate of new space opening.
Tom, great question. As you identified, we did open eight this quarter, and we are on target to open 23 for the year or 45 over the next two years. We do see when we do open a store, that you do get some trade transfer into the new store. We would not say that is any more than we would have seen historically. That is just part of when we do open a store. That is not an increasing trend or anything like that. But what we do see is when those stores do establish, it takes about a three-year sort of horizon for those stores to mature from a sales perspective. We are pleased with the performance of these stores that we have opened, and we are not seeing unusual transfer from a trade transfer perspective.
Okay. Thanks, Charlie.
Thank you. The next question is a follow-up from Bryan Raymond from JP Morgan. Please go ahead.
Thanks for taking the follow-up. I guess mine's just back on the investment in value. I just wanted to understand if there's a way to sort of quantify it. We can obviously triangulate a few things based on your cost growth and sales growth, but if there's a way to sort of give us a dollar figure or basis point figure around what your target investment is. Then just a follow-up to that is, if that doesn't have the effect of accelerating sales growth, are you committing to remaining rational on broader, large-scale price investment? Because that's what the market's concerned about, that we head into a more meaningful It's more of a challenging environment for gross margins longer term for the whole industry. I just want to make sure that that rationality is still in place, which it certainly has been over the years for Coles. Thanks.
We won't be putting a number on the value investment. I think Charlie has already laid out the sort of the three levers that are leading to the EBIT guidance today. You can probably get to an assumption in there in terms of sort of ballpark how much we're thinking for the half. What I will say is that it is going to be targeted, and it's going to be across a range of mechanics. It will be into areas like promotions, it'll be into Everyday Value, it'll be in Flybuys, and we're also going to look to supplement it with other initiatives that we can do to improve the customer offer. For example, putting on more online capacity as we come into Christmas. I mean, our perspective on this is we have an aspiration to grow in line or above market.
We've said it many times before. We want to make sure that we're competitive, so we are just making a targeted set of investments here to get us to the point where we want to be. We know that customers are going to be more cautious. So, from my perspective, this makes good sense from a customer perspective, but it also makes good sense from a long-term health of the business perspective to lean in at this point and do it. The three-point plan that we had around stepping up that investment in value, communicating it more strongly, focusing in on those big customer moments as we come into the back end of the year, then really doubling down on our focus around execution and availability.
We are confident that they are the right three things for us to focus on to get this to where it needs to be.
Yeah. Bryan, probably I will step in and make sure that there are three elements, again, to what's in terms of our EBIT guidance that changed. One, first element of that is definitely the sales slide through. As Leah Weckert said, we target to be growing above market. It hasn't been in line with what our expectations are. You need to factor that through if you're trying to come to a number. We've given you a bit of a view on fuel costs as well that we saw through the period. So, I'd just be very cautious that, as Leah Weckert said, this is some targeted value in some select areas, and it's as much about communication of the value and the various mechanics that we're using as much as it is about value investment.
Okay. All sounds very rational, and hoping it all stays that way. Thank you.
Thank you. The next question is a follow-up from Shaun Cousins from UBS. Please go ahead.
Great. Thank you. Maybe just a question for Anna Croft. Execution is becoming an increasing point of discussion where Coles is making some missteps. If you could just talk a little bit about this is around possibly having too many promotions with too little stock, and then also not having as many off-location displays, seeking to have a clean store. This was an issue, I think, in Christmas 2025, but ultimately has weighed on your performance in the impulse categories. Can you talk a little bit about how execution issues are impacting your sales growth rates, how quickly you can improve execution, and then moreover, how quickly will that be noticed by customers and so that it can help you get back to a higher rate of sales growth, please?
Yeah, of course. I might tag team with Matt Swindells on this as well.
Please.
Look, I think what we are feeling really pleased about is some of the structural changes we have made over a couple of years, which have certainly been driving sales. That would be the work on Coles Online, really working through there, the investment in renewal and stores, and the work on ranges coming through very, very strongly. We are seeing very good execution scores there around tailoring the range, simplification, and the move we have already made on store-specific. We have seen the work on fresh also driving the quality metrics and performance. Actually, up until some structural challenges on availability in certain categories, we have seen that trending very well on the back of investments out of both the ADCs, but also end-to-end work we have been doing both internally and with our supplier partners further upstream.
There have been discussions around stock weight, and we've been working with our supplier partners to deeply understand that. What I would say is we've got more stock weight in store now than we did a year ago. We've got fewer lines on off-locations with greater volume coming in. Actually, we've got more off-locations in store than we did this time last year. Moving forward, all of those will be planogrammed. So actually, what we're finding is the focus on really making sure we've got the right stock at the right time. What we are struggling to manage is where we have big structural availability challenges in categories such as chilled desserts and yogurts. Actually, what we know is once one category, one supplier falls over in that category, the impact on others is quite structural.
We've seen big gaps in there, which leads to some challenges. So, we're doing an awful lot to step forward, but actually, we feel very optimistic around the future. We have been, for many years, over-indexing the space we had on impulse for off-locations, and we have seen a rise of that coming through in other parts of the market. But we continue to try and get a balanced offer for customers, and continue to put the stock weight where it needs to be. But I might hand to Matt as well, because it is a team effort in terms of how we think about stock weight and execution.
Yeah. Morning, Shaun. Anna, I think you did a good job of covering most of the content, frankly. It shows we are very aligned on stock weight, particularly where there is strong value and high volume, not just between the commercial teams and the operations supply chain teams, but also with the supplier partners more than ever. Those fewer, bigger, bolder promotions are also being driven harder in our bigger stores, where we can trade the space to a greater extent. So, we're right in the details, Shaun. We are working this end-to-end and seeing some good results.
In short there, you suggest that execution hasn't been that much of an issue, or more of it has been a challenge, but you're very much on it? I'm just curious around where we're at now in terms of sort of, it looks as though there's obviously a lot going on there. Is it really just your value perception that's the problem rather than execution?
I think we would say, Shaun, that there have been a few availability challenges over the last few months, but a lot of those are actually market-wide structural challenges.
If you take something like yogurt, the whole market has struggled to get as much volume as they would want in that space. In terms of things like bananas and strawberries, that has been, again, a market-wide impact, which is actually related to growing conditions. Now, we have probably made some choices there on what quality we have been willing to flow into store, because we know that customers getting a punnet of strawberries home and then them having not in shape to eat the next day, that's not a good customer experience. We have made some deliberate choices there. The other one I'd probably call out is the canned fish area, which is, again, that sort of protein trend, like the yogurts, where we've got suppliers struggling to keep up in terms of capacity.
We're not saying that there haven't been a number of availability issues during the last few months, but what we're saying is, I don't think that they're unique to Coles.
Fantastic. Thank you.
I was just going to say, your narrative from suppliers would be similar, and we are really deeply understanding what that is and working closely on the actions required. So, we feel quite confident in the future.
Okay. Fantastic. Thank you, Anna, Leah, and Matt.
Thank you. The next question is a follow-up from Craig Woolford from MST Marquee. Please go ahead.
Thanks. Just a follow-up on the liquor statement. Haven't spoken about that much, but wanted to understand what the sort of messages under the surface are. I noticed that e-commerce sales went backwards. There's a comment in there about RTDs doing quite well. How would you characterize the competitive intensity in that liquor business?
Well, it's still very competitive, and part of that is driven by consumers. There's a number of factors which are leading to this category behaving more like a discretionary category at the moment. There's definitely the health overlay, younger generations are drinking less, and as budgets tighten, this is an area that consumers will cut back on. What we've been very pleased with is that the growth has moderated as we've moved into Q1 versus Q4. Actually, on the online, some of that is a bit hidden because as we start to execute our strategy around the repositioning the network with more co-locations, pushing our integrated food and drink offer, and realigning the cost base. That second one around the integrated food and drink offer, we are doing more through Coles Online, and actually in Coles Online, we saw a 20% growth of liquor.
That was strong, but it's just coming through a different channel than it previously did, which was the Liquorland website. I think at the moment, we're feeling like we've got a convenience portfolio that's in growth. We've got an improving trajectory on the warehouses. We're seeing good early results from the work that we're doing on the integration, and we've got really strong customer metrics. All of those would point to we're starting to get some momentum behind the repositioning. There's obviously more work to be done, particularly around the network piece, which will start to really gather some steam as we head into the back end of the year.
We are pleased with the store optimization program. That's on track, and we are pleased also with the cost control and the elements of integrating that sort of food and liquor elements really well. I think the plan that we outlined in August, we're actually quite pleased in terms of delivery against that.
Okay, thank you.
Thank you. The next question is a follow-up from Ben Gilbert from Jarden. Please go ahead.
Thanks for the follow-up. I appreciate it is a sales call, but just talking about the earnings guidance. Just on costs, do you think you have cut costs too far, across either at a store level or head office? Do you think there is an opportunity you need to put any cost back in around service or on some of these capabilities around trying to improve in-stocks, these sorts of things?
I will get Charlie maybe to talk to it, but I would reference you back to where we are on our customer satisfaction scores, which have all seen really strong improvement year-on-year, and we shared some of those numbers at the full year. That would point to that customers are getting a better experience in our stores, through online, and through the changes that we have been making. Of course, there is no doubt we are leveraging more technology and AI to help us to impact that cost base, but we think we are getting the balance right. Do you have anything you wanted to add on that?
No, look, only in terms of, Ben, I think we also are pleased with that sort of cost leadership sort of element. We are very mindful where those costs are targeted. I will just remind that we have been, and it is an important part of us trying to keep CODB as a percentage of sales flat year-on-year. We think that is an important element of, gives us the flexibility and optionality to be able to, things like make targeted investments where we need to, and up the customer value proposition and the like. So, look, we are pleased with progress, we are pleased with the areas that we are targeting, and we are on track to deliver, as I think said earlier, over AUD 1 billion of savings over this four-year program that we have with Simplify & Save to Invest.
You touched on that there, Leah and Charlie, just around the AI piece. Do you think the structure of your data, in terms of just having that well-structured data, is just the lever you need to be able to adopt a lot of this AI change at pace, or do you still need to do a lot of work around that in the back end?
Well, I think there would not be a company that I have run into yet who would say that their data is 100% where they want it to be. I think we are all learning as we continue to move forward, particularly on the agentic AI journey of what needs to be done here. But we have actually invested quite a lot of work into improving our data, and the setup around it over time, because we needed to as part of the implementation of both the ADCs and the CFCs. They are both robotic facilities that use a lot of AI in them, which are highly dependent on having good data for them to be able to run. So there were enormous data projects that were run in parallel with their implementation that, particularly in that supply chain space, we are very well set up on.
Thank you.
I would say. One of the fundamental elements of the Capability Centre is actually that sort of data and AI integration and that investment in technology in positioning the business going forward, so from here as well. We are pleased. We've actually got a really good plan in place to continue to drive benefits through data.
I think this is going to be an evolving space. It's not something where the work is going to stop. You're going to continue to need to improve it and adapt it as the new capabilities emerge.
All right. Thank you.
Thank you. The next question is a follow-up from Michael Simotas from Jefferies. Please go ahead.
Thanks for taking another one. I know you do not disclose detail on transactions versus items versus ASP, et cetera, but if we look at what Woolworths reported earlier in the week, they had quite a nice tailwind from ASP, even though inflation is still relatively subdued. Qualitatively, is that something you saw in your business, or are you missing out on the trade-up and the trade-in from restaurants that seems to be driving some of that for them?
Yeah. Hi, Michael. We did see ASP growth in the quarter, and actually in line with where we had expected it to be. What we are seeing when you think about restaurant trade down and the opportunity that gives us, that came through very much for us in Coles Finest, 13.3%, and certainly we are seeing those meal occasions. We are seeing customers trade down on certain elements during the week, but certainly we are seeing the trade up on the key moments that matter as well. We did see some pretty solid ASP, but we are focused on making sure we have got units in the basket, we have got strong transaction growth, and we are managing ASP in terms of keeping prices down for customers. If the mix changes and that drives the ASP, well, that means we are giving them the offer they want, when they want it.
Yep. Got it. Thank you.
Thank you. At this time, we are showing no further questions. I will hand the conference back to Leah for any closing remarks.
Thank you very much for joining us today. As we look ahead, our immediate focus is on delivering a strong offer for customers through the important Christmas and summer trading periods. We know customers are thinking carefully about both time and money this Christmas, so our Christmas range has been designed with that firmly in mind, helping customers put something special on the table while making entertaining easier and providing great value across the shop. This year, we have got our largest own brand Christmas range yet, with 371 exclusive Christmas food and drink products across Coles and Liquorland, which includes 158 new products, with our Coles Finest range that Anna just spoke about, increasing by 40% as we see customers looking for those more premium products.
That combination of value, quality, and convenience is particularly important this year, and our team members are working hard to make Christmas special for our customers. I am confident that our team's focus on providing quality, choice, and inspiration for customers will deliver improving momentum through the festive season. Thank you, and I look forward to speaking to you and seeing many of you at our Investor Day at the end of November.