Coles Group reported FY26 EBIT growth of 10% driven by better gross margins and tight cost control in its Supermarket business. The outlook for margin expansion from here is limited given Supermarket margins are at a decade high and cost inflation will be elevated in the next 12 months. Coles Liquor business may stabilise earnings, but its EBIT margin of less than 2% looks like persisting for some time. Coles will spend more capex on supermarket renewals and automated DCs. This is sensible investment but does mean that free cash flow will be limited.