Targeting the Supermarkets
With Woolworths and Coles reporting their 2026 results, it’s easy to make their billions in revenue and profits political targets. But does translating their nominal Financial Year 2026 (FY26) results into the terms of an Australian household’s economics reinforce the criticisms levelled at them?
To help answer this question, I ran a bit of a thought experiment. Follow on below to find out more.
Together, Woolworths and Coles Supermarkets generated about $95.3 billion of sales in FY26. Against Australia’s latest official population estimate of 27.8 million, that equates to roughly $3,430 per Australian per year, or $66 a week.
On that simple population-equivalent basis, the supermarkets pull in an average $198 a week for a single parent with two children, $264 for a family of four and $330 for a family of five. These aren’t estimates of what those particular households actually spend – children and adults obviously consume differently – but they provide a handy, if not a useful, way of putting the enormous revenue numbers into perspective.
Looking at gross margins, Coles reported a FY26 supermarket gross margin (GM) of 27.8 per cent, while Woolworths reported an Australian Food GM of 28.6 per cent in the first half of FY26. Using those rates gives combined gross profit of roughly $27 billion.
On a population-equivalent basis, that works out to the supermarket majors making about $56 a week from a three-person household, $75 from a family of four and $93 a week from a family of five.
And while that might sound like a substantial amount being extracted from the weekly grocery bill, one needs to remember that gross profit needs to then fund store employees, distribution centres, transport, rent, electricity, technology, depreciation, theft and stock losses, administration and a host of other costs required to put groceries on shelves around the country, in the first place.
After those costs, Woolworths produced about $2.95 billion in Earnings Before Interest and Taxes ( EBIT) in FY26, and Coles Supermarkets about $2.37 billion, meaning only around 5.6 cents of every dollar of supermarket sales remained as operating profit.
At the household level, that’s equivalent to earning about $11 a week from a single parent with two children, $15 from a family of four and $18 from a family of five – and that’s still before interest and tax.
Taking the analysis all the way to net profit, Woolworths reported FY26 underlying group Net Profit After Tax (NPAT) of about $1.60 billion and Coles about $1.26 billion, or approximately $2.86 billion combined. If we attributed every dollar of those group profits to Australian supermarket customers, it would amount to roughly $6 a week for a three-person household, $8 for a family of four and less than $10 for a family of five.
In reality, even that overstates the amount attributable to Australian grocery shoppers because those profits also include businesses outside the Australian supermarket operations, including Woolworths’ New Zealand and other businesses and Coles’ liquor operations.
There is an interesting thought experiment here.
Suppose Woolworths and Coles became not-for-profit enterprises tomorrow and somehow managed to maintain exactly the same stores, employees, distribution networks, investment and service while returning their entire underlying group profit to customers through lower prices. Based on this admittedly simplified calculation, the benefit would be less than $6 a week for a single parent with two children, about $8 for a family of four, and less than $10 for a family of five. That’s not insignificant to a household under financial pressure. But it also doesn’t provide much comfort for those who feel a family’s grocery bill is painfully high.
That distinction matters. Australians are entirely justified in demanding vigorous competition between Woolworths and Coles, transparent promotional practices and fair treatment of suppliers. A market dominated by two very large participants deserves scrutiny and regulation.
But high grocery prices and supermarket profiteering aren’t the same thing. Roughly 94 cents of every supermarket sales dollar doesn’t become operating profit for Coles or Woolworths. Even abolishing their 2026 profits altogether would make a surprisingly modest difference to the ‘average’ family’s weekly cost of living.
The conclusion, therefore, has to be more nuanced. Australian families can reasonably feel that groceries are expensive. They can reasonably question whether competition in supermarkets is strong enough. What is much harder to sustain from the FY26 accounts is the proposition that their grocery bills are high principally because Woolworths and Coles are taking them to the cleaners. While the numbers are averages, they nevertheless, to my own disappointment, just don’t support that argument.
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
He is also author of best-selling investment guide-book for the stock market, Value.able – how to value the best stocks and buy them for less than they are worth.
Roger appears regularly on television and radio, and in the press, including ABC radio and TV, The Australian and Ausbiz. View upcoming media appearances.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
