Coles Group Ltd (ASX: COL) shares are edging lower on Friday morning.
At the time of writing, the ASX 200 supermarket giant's shares are down 0.5% to $21.99.
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Why are Coles shares falling today?
Investors appear to be responding negatively to the release of the company's third-quarter sales update.
According to the release, Coles reported total group sales revenue of $10.7 billion for the 12 weeks to 29 March 2026, representing a 3.1% increase on the prior corresponding period.
The standout performer was the company's key Supermarkets division, which delivered sales revenue of $9.8 billion. This was up 4% on the prior corresponding period, with comparable sales increasing by 3.6%.
Pleasingly for investors, Coles advised that this represented above-market growth, highlighting the strength of its customer offer and continued execution.
Volume growth impresses
One of the key positives from the update was that sales growth was volume-led, rather than simply being driven by inflation.
Excluding tobacco, supermarket sales increased by 5.7% during the quarter. This was underpinned by Coles' focus on value, targeted promotions, and strong engagement with its seasonal campaigns.
The company also noted that there has been elevated demand for pantry staples in March in response to geopolitical uncertainty in the Middle East.
At the same time, price inflation continued to moderate. Supermarkets inflation excluding tobacco eased to 0.8%, down from 1.7% in the second quarter. This reflected deflation in fresh produce, easing packaged grocery inflation, and increased promotional activity.
Online growth remains strong
Another highlight was Coles' eCommerce performance.
Supermarkets ecommerce sales rose 24.8% to $1.3 billion, with penetration increasing to 13.6%. Management noted that online momentum remained strong throughout the quarter, with penetration reaching 14.2% in March.
Flybuys also continued to support customer engagement, with active members increasing 5% to 10.3 million.
Liquor disappoints again
The main soft spot in the update was the Liquor business once again.
Liquor sales revenue fell 3.9% to $781 million, while comparable sales declined 4.3%. Management said trading conditions remained competitive and soft, particularly in March as consumer sentiment weakened. This has continued into the fourth quarter.
Management commentary
Commenting on the company's performance, Coles Group CEO, Leah Weckert, said:
We delivered another strong sales result reflecting the strength of our customer offer and disciplined execution against our strategic priorities. Achieving consistent sales momentum for the period over multiple years demonstrates our commitment to remaining focused on long term outcomes whilst successfully navigating short term volatility in market conditions and supply chains.
Outlook
Looking ahead, Coles said Supermarkets sales growth early in the fourth quarter has remained broadly in line with the third quarter after adjusting for Easter and Anzac Day timing impacts.
However, it warned that it has seen an increase in supplier cost price increase requests and higher costs within its own operations, particularly in fuel, freight and packaging. It is actively managing these and aims to mitigate impacts where possible.
Commenting on its outlook, Weckert said:
We know value and availability will be important to our customers over the months ahead and we are well placed to respond to this with our extensive own brand portfolio, our leading eCommerce platforms and the strength of the infrastructure and capability that sits within our supply chain.
