Owners of Coles Group Ltd (ASX: COL) shares and Woolworths Group Ltd (ASX: WOW) shares have both seen their companies report results recently. The numbers of the two businesses were markedly different.
Towards the end of 2024, Woolworths suffered industrial action at some of its distribution centres, which hurt sales and increased costs. While that was detrimental for Woolworths, it seems to have benefited Coles.
While the two businesses are largely similar, there are differences between them. Coles still has its liquor division (including Liquorland, Vintage Cellars, and First Choice), but Woolworths doesn't. On the other hand, Woolworths owns a business-to-business (B2B) food segment, BIG W, and is the majority owner of PETstock.
Financial performance
The reports for the first six months of FY25 showed Coles' recent performance superior to Woolworths.
Coles reported that total sales grew 3.7% to $23 billion (with supermarket sales up 4.3%), underlying operating profit (EBITDA) increased 12.5% to $2.1 billion, underlying net profit increased 6.4% to $666 million, statutory profit reduced 2.2% (due to costs related to its new automated warehouses), and the interim dividend per share rose 2.8% to 37 cents.
On the other hand, Woolworths reported growing total sales by 3.7% (with Australian supermarket sales up 2.7%), underlying EBITDA declining 4% to $2.96 billion, underlying net profit falling 20.6% to $739 million, and statutory net profit improving $1.5 billion to $739 million.
On the underlying numbers, it's clear that Coles performed stronger out of the two.
Outlook
Those HY25 numbers are now the past. Ongoing trading performance is now the most important factor for both businesses.
In the first seven weeks of the second half of FY25, Woolworths Australian food sales grew by 3.3% thanks to "a more stable trading environment following the recovery from industrial action, cycling lower growth in the prior year, a collectibles program and ongoing e-commerce growth."
Coles said in the first seven weeks of the third quarter of FY25, sales rose by 3.4% despite cycling a "very strong" FY24 third quarter. Coles said customers "remain value-conscious" with its exclusive brand portfolio continuing to grow.
While the sales growth is a similar rate, Coles seems to be winning with its outlook too.
Financial metrics
The broker UBS predicts ongoing progress for Coles over the rest of FY25, while Woolworths could see a decline.
UBS projects Coles' profit could rise to $1.12 billion, which could fund an increase in the dividend to 72 cents. At the current Coles share price, it's trading at under 24x FY25's estimated earnings.
The broker forecasts Woolworths' profit could fall close to $300 million to $1.4 billion in FY25, and the dividend per share could be cut to 90 cents per share. That puts the current Woolworths share price at 26x FY25's estimated earnings.
Coles shares are still cheaper, and it's performing financially better – it'd be my pick compared to Woolworths shares.
