Upcoming quarterly sales for Coles, Woolworths and Endeavour Group will show a continuation of recent themes. Coles Supermarkets winning, receding inflation and weak liquor volumes. We forecast 1Q26e comp sales of 4.2% for Coles and 1.6% for Woolworths. This gap is approaching a level where Coles could also win 2Q26e, an outcome that would intensify the scrutiny on Woolworths Board and management. We forecast Coles Liquor comps at -0.3% and Woolworths at -0.6%. Liquor retail is still in the doldrums, but pubs are back in growth suggesting broader liquor consumption concerns are easing.

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.

Coles reported FY25 EBIT up 7.5% on a 52-week basis. Growth was stronger in Supermarkets, partly offset declines in Liquor and higher overheads. Coles has had a strong start to FY26e sales in Supermarkets, which we largely attribute to market share gains. The combination of better sales, one-off costs from last year rolling off and supply chain savings should support group EBIT growth of 12.5% in FY26e. We expect growth to then step down to 5%-7% in FY27e and beyond.

Woolworths reported FY25 EBIT down 15%. While it was a rough year, the more concerning issue is that its rebound in FY26e has been tempered by guidance. The earnings recovery will be impacted by ongoing investment in its supply chain transformation and simplification. Woolworths sales trends are likely to accelerate beyond 1Q26e as price investment and execution improve and management disruptions settle down. We lower our EPS by 7.9% in FY26e and 9.6% in FY27e given higher one-off costs.

Woolworths has had a rough FY25 for a range of reasons. However, looking forward, we are more interested in the company’s strategic direction under CEO Amanda Bardwell. We expect more details in coming months that may lead to further “simplification” or cost savings and decisive action on underperforming businesses like Big W, HealthyLife and Marketplus. Woolworths is also likely to double-down on its core proposition as “the fresh food people”. In this report, we assess the extent of any potential strategic shift by Woolworths and the implications for the broader industry. As Woolworths recovers, others will feel the impact.

Woolworths improving 3Q25 sales trends suggest the disruptions from distribution centre strikes and public scrutiny are settling. We expect sales trends to remain near prevailing levels and the differential in growth between Coles and Woolworths will be small. Big W’s losses are accelerating and the retailer’s plans for improvement will be difficult to execute given the competitive backdrop. Losses could grow and an exit or sale of Big W is increasingly likely in our view.

The upcoming 3Q25e sales results for Coles, Woolworths and Endeavour Group are likely to show Coles in front in both supermarkets and liquor. The shift of Easter timing will distort growth rates. We forecast Coles Supermarket comparable sales at 3.0% and Woolworths at 2.6%. For Coles Liquor, we forecast 2.6% and Endeavour Retail at -0.3%. All figures are Easter-adjusted. We will be interested in any step change in inflation for produce and meat given recent weather disruptions. Overall industry sales growth rates remain lacklustre, particularly relative to cost growth

The ACCC Supermarkets Inquiry report has 20 recommendations. None of these recommendations step change earnings, but the report does highlight three things. Firstly, supermarkets will have more margin volatility in fresh produce; secondly, it provides a reminder that price inflation does lift the industry profit pool; thirdly it will be difficult for Coles and Woolworths to grow market share given limits on new stores and elevated gross margins in some categories.

Coles reported 1H25 EBIT up 5% with a stronger lift in its Supermarkets division of 7%. The company had solid sales trends, which partly reflected a benefit from Woolworths DC strikes. Underlying sales and EBIT growth in the Supermarket business is closer to 3%-4%. Cost savings and DC efficiencies are offsetting natural cost inflation, not boosting margins. Over the next 18 months, Coles will benefit from the unwind of transition costs that will lead to double-digit EPS growth.

Woolworths reported sales up 4%, but EBIT down 14% in 1H25. We expect the company will have a challenging 2H25e as well. Management is starting to address its challenges. CEO, Amanda Bardwell, said that the company will assess the shape of its business portfolio. Each business unit must have reasonable prospects on a 3-5 year view. Overhead costs are being cut and there is a tougher stance on the low returning Big W and NZ divisions.