Coles reported a soft 1Q27 sales result with Supermarket segment comp sales of 2.7%. Coles decision to invest in price and marketing to restore market share is logical but adds risks. Coles will invest close to $40 million in 2Q27e on our estimates and ongoing price investment will be needed in 2H27e. Even so, Coles ability to restore market share will be held back by Woolworths ongoing improved execution and Aldi may not cede share in 2027. Coles Supermarket EBIT margin of 5.7% in FY26 was a peak in our view and we see it falling to 5.5% in FY27e.

Metcash’s sales trends are improving with the tobacco headwind turning into a tailwind and higher price inflation in hardware supporting sales growth. We forecast 3% sales growth for 1H27e, up from 1.9% at its trading update given in mid-June 2026 and only 0.3% in its 2H26 result. While sales trends are better, the source of sales growth is lower margin.

Metcash’s FY26 EBIT of $504 million, declined by 1%. Additional detail about its trading conditions early FY27e look promising. However, the company will have a number of hurdles that result in only 1% EBIT growth for FY27e on our estimates. The improvement in sales trends for Metcash will come from tobacco, which is low margin. Recent investments in retail stores and IT systems will lift depreciation and interest costs.

Metcash’s FY26e trading update highlights slightly stronger second-half sales trends and better margin results in both Food and Liquor segments. While Hardware sales growth was stronger, margins declined. Metcash is managing the soft sales backdrop by cutting costs and tobacco headwinds should ease substantially in FY27e. The primary risks we see are the magnitude of the margin recovery in Hardware and the increasing likelihood of retail store ownership in Supermarkets.

Endeavour Group’s 3Q26 trading update revealed slower sales trends with an enticement of $100 million in cost savings in FY27e as a benefit. The reality is that sales trends are insufficient for cost savings to drop through to earnings. We expect Endeavour to continue gaining market share given First Choice could close, but a recovery in market growth is more important in our view, which may take time as retail liquor reverts to slight per capita volume declines.

Metcash reported a 2% drop in EBIT for 1H26. The company’s sales trends are likely to soften a little from here, particularly as it laps Woolworths DC strikes and the Black Friday boost to Total Tools dissipates. The swing factor for Metcash is its corporate hardware stores that need a meaningful upswing in the residential construction cycle. Profit margins are depressed and should recover. The combination of optionality around hardware upside, contract wins in convenience and a good dividend yield give us reason to be positive.

We have published our periodical chart pack of retailer performance vs market. See attached PDF.  This market share report provides two insights – 1) which retailers are winning and to what extent. 2) Insights about market structure.  If you would like any of the data in Excel at any point, just contact us.

Coles Group reported 1Q26 sales growth of 3.9% and an impressive 4.6% comparable sales growth in its Supermarkets. While the result is strong, the momentum is likely to slow as its larger rival Woolworths starts to improve its execution. Coles also faces a 2Q26e hurdle from DC strike benefits in 2Q25 and a diminishing contribution from new stores. We expect Liquor EBIT to decline again in FY26e.

We have made modest revisions to our retail sales forecasts. For FY26e, we forecast retail sales growth of 4.0% (prev 3.9%) and for FY27e 4.1% growth (unchanged). Non-food retail spending has been solid in the past six months and the trends are likely to continue into Christmas this year. However, we may see some shift in category performance in the new year as household goods slow, while fashion and takeaway food sales improve. Our upswing in retail sales is muted, which is a function of slowing household income growth and a low savings rates. We continue to monitor house prices closely as a source of upside risk if the wealth effect stimulates the use of previously stored-up savings.

Metcash’s 18-week AGM trading update highlighted a slowdown in sales. For the first 7 weeks, group sales were up 4.7% and the next 11 weeks, to the end of August 2025, sales dropped 1.2%. The biggest contributors to the slowdown were declining tobacco sales (-34%) and annualising Superior Foods acquisition (now trending at 2.7% growth). Metcash’s underlying results show sales trends slightly lower than industry growth other than liquor. Hardware sales trends remain sluggish, albeit improving over recent months.