Australian grocery chains post higher annual profits, deny price gouging

Two of Australia’s largest supermarket chains are set to report stronger full-year earnings.

Woolworths Group and Coles Group, which together account for two-thirds of Australia’s grocery sales by value, each posted higher year-over-year profits.

On Wednesday, 23 August, Coles reported a 4.8 percent increase in full-year profit to AUD 1.1 billion (USD 712 million, EUR 652 million), on AUD 36.75 billion (USD 23 billion, EUR 21 billion) in revenue, up 6 percent.

On 25 August, Woolworths upped its profit 4.6 percent to AUD 1.62 billion (USD 1 billion, EUR 960,000) on revenue of AUD 64.29 billion (USD 41 billion, EUR 38 billion).

Both companies benefitted from passing through higher prices to consumers, according to Reuters.

"Our channel checks and pricing study suggest [both] have been lifting shelf prices by more than the wholesale price increases they are accepting. We expect this will be reflected in higher gross margins," analysts from the financial services firm Jefferies analysts wrote in a note.

While prices for some food items have fallen in recent months in Australia, Inflation is still taking a toll on value-added and packaged goods, as well as dairy and bakery items, The Guardian reported.

Australian consumers are watching their purchases, engaging in more meal planning, and seeking out cheaper brands, according to Coles CEO Leah Weckert.

“What I would probably say is they’ve been really savvy shoppers,” Weckert told The Guardian. “They know how much they have to spend and they know what they want to achieve out of it.”

KCM Trade Chief Market Analyst Tim Waterer said smaller grocery chains in Australia were struggling as consumers changed their behavior following a spending boom during the Covid pandemic, and as their costs have risen.

"While the big supermarket chains are doing well in this era of high inflation, discretionary retailers are finding the going much tougher as consumers are forced to be more selective about their spending," Waterer said.

A federal parliamentary inquiry initiated earlier this year has looked into the possibility that potential price gouging was the main driver behind climbing profits at Woolworths and Coles, but both companies denied the allegation, citing productivity improvements a primary reason for their recent success.

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