Coles down -8% on revenue miss, punished due to it being relatively flat to begin with

Coles Ltd (ASX:COL) has released its earnings report at the tail end of earnings season and the result has been fairly tame given the madness we’ve seen over the last few weeks – a slight earnings miss resulted in a sell-off from investors who weren’t too pleased. There were no staggering rises or declines; so far, good old boring world.

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Part of the fact investors punished a miss has to do with revenues, which were already fairly flat to begin with per analyst’s expectations.

What Coles delivered on Friday was that its revenue growth vs 1HFY25 has increased only 2.5% – and given analysts were expecting something closer to 3%, that wasn’t particularly well-favoured.

Earnings before tax increased +10% to $1.23B and profits after tax came in 11.3% higher at $511M. That wasn’t enough to save the company on Friday, nor was a dividend of 41cps.

Notably, Coles – the largely bricks-and-mortar based supermarket which is also one of Australia’s most aggressive land buyers – highlighted that “automation programs” delivered tangible benefits.

In this context, they’re talking about automated customer fulfilment centres using “grid robotic pick arms” – in other words, warehouses for the growing cohort of shoppers who order groceries online. An expanded partnership with Uber Eats was also flagged, and the company’s own radio station, Coles 360, increased income by 10%.

AI, too, reared its head – of course it did – with Coles ‘partnering’ with OpenAI to “commence the roll out of ChatGPT Enterprise to team members within our store support centres.”

But it looks like automated warehouses powered by robot arms might be where the real meat of Coles’ sci-fi ambitions lie. At the same time, that wasn’t enough either to turn the tide (though it would be unlikely to anyway).

The big takeaway? In the battle of the Coles/Woolworths duopoly, so long as you accept my imputation there’s a ‘battle’ at all, Woolworths continues to win. The WOW market cap is currently at $44.3B; COL at $27.3B.

At the same time, Coles is flat YoY, while WOW is returning investors +18% on a 1Y basis. When it comes to Coles, were it not for the dividends, you’d be better off putting money in a term deposit.

COL last traded at $20.34/sh.

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