The supermarket wars are in full swing in every suburb across Australia. Look at the scoreboard on the stock market, however, and you realise one is doing significantly better than the other. Woolies and Coles-owner Wesfarmers reported their results yesterday and while one saw a meagre price increase, another slumped by almost 15% in a single day.

By the numbers: how did each perform?

It was a tale of two supermarket giants in this week’s earnings season. Coles posted strong results, with supermarket sales up 4.3% and group EBIT climbing 6.8%, powered by volume growth, booming eCommerce (+24.4%), and improved margins. Profit rose modestly to just over $1.08 billion, with the company rewarding investors with a 32c final dividend.

Woolworths, by contrast, faltered. Group EBIT tumbled 12.6%, NPAT slid 17.1%, and margins shrank across its core Australian Food business. Strikes, supply chain commissioning costs, and wage pressures bit into profit even as sales edged up 3.1%. Its BIG W chain swung to a $35m loss, further dragging the group down, while impairments and restructuring charges totalled $569m .

The market delivered its verdict swiftly. The supermarket itself closed up almost 4% at $23.38 per share while Coles-owner Wesfarmers closed up 0.38% on Wednesday at $91.68 per share, extending a stellar run that has the conglomerated retail giant's stock up nearly 30% year to date.

Woolworths, meanwhile, slumped 14.69% on the day, wiping out all progress it had made in 2025, with shares now down almost 7% year to date.

Why Wesfarmers is winning

Coles’ FY25 result highlights a business hitting its stride while its rival stumbles.

The supermarket division, which accounts for the bulk of earnings, delivered 5.7% volume growth once tobacco is stripped out, a sharp contrast to Woolworths where volume gains were more muted.

According to Coles, its customers are responding a focus on value, quality and availability, with its “Finest” premium line growing double digits and loyalty subscriptions through Coles Plus more than doubling.

Margin expansion was the key differentiator. Coles grew margins thanks to a combination of loss reduction, sourcing improvements and digital advertising revenues through its Coles 360 retail media arm, which climbed 13.5%.

Woolworths, by contrast, saw its Australian Food EBIT margins contract by 82 basis points as it absorbed wage hikes, deeper promotions, and rising depreciation linked to new stores and supply chain assets .

Technology and logistics are also tilting the field. Coles’ investment in automated distribution centres and customer fulfilment centres is beginning to pay off, stripping costs from the network and boosting reliability. Those efficiencies helped fund its pricing strategy without eroding profitability — something Woolworths has struggled to replicate as it juggles new warehouse commissioning costs and disruptions.

Digitally, Coles is catching Woolworths fast. Its eCommerce sales grew 24.4% to $4.5b, with penetration at 11.2%, while its Flybuys loyalty scheme continues to expand, hitting 9.9m active members. Woolworths still leads online with 15.1% penetration and its Everyday Rewards program topping 10m members, but it hasn’t translated digital strength into bottom-line performance. For Coles, digital channels are accretive to profit; for Woolworths, they remain margin-dilutive.

Balance sheet discipline is another Wesfarmers hallmark. Coles delivered $3.98b in operating cash flow, a 102% cash realisation rate, and maintained leverage at manageable levels. That stability supports ongoing dividends and future investment. Woolworths, meanwhile, is still restructuring — taking impairments on BIG W, MyDeal and Healthylife, and absorbing $569m in significant items.

The result is a widening divergence in market confidence.

Investors seemingly view Wesfarmers not only running Coles more efficiently, but also balancing growth, cash returns and strategic investment in a way Woolworths is not.

Coles enters FY26 with supermarkets growing nearly 5% already in the first eight weeks, but Woolworths’ outlook is framed as a “transitional year” — promising improvement, but facing further headwinds from the tobacco decline, IT replacement costs, and the challenge of turning BIG W around.