Coles has issued a warning that grocery prices may come under pressure as suppliers grapple with rising costs, potentially squeezing the supermarket giant's margins.
The warning comes as Coles reported its third-quarter results, revealing that while sales have grown, the company is facing increasing pressure from suppliers who are passing on higher costs. Chief Executive Steven Cain said that the company is seeing cost increases across a range of categories, including packaged goods, fresh produce, and meat.
“We are seeing cost price increases from suppliers across a broad range of categories,” Mr Cain said. “We are working hard to manage these pressures, but it is likely that some of these costs will need to be passed on to customers.”
The warning has raised concerns about the impact on household budgets, with inflation already putting pressure on Australian families. Coles said it is focused on keeping prices as low as possible, but warned that the current environment is challenging.
Analysts say that the cost pressure is being driven by a number of factors, including rising energy prices, higher freight costs, and increased wages. Suppliers are also facing higher costs for raw materials and packaging.
Coles said it is working with suppliers to find efficiencies and reduce costs, but acknowledged that some price increases are inevitable. The company reported that its third-quarter sales rose 3.6% to $9.8 billion, driven by strong growth in its supermarkets and liquor businesses.
However, the company's earnings before interest and tax fell 1.2% to $1.1 billion, reflecting the impact of higher costs. Coles said it expects the cost pressure to continue in the coming months, and that it is taking steps to mitigate the impact on its bottom line.
The warning from Coles comes as rival Woolworths also faces similar pressures. The two supermarket giants are the dominant players in the Australian grocery market, and any price increases are likely to have a significant impact on consumers.
Industry experts say that the cost pressure is likely to persist for some time, as global supply chain disruptions and inflationary pressures continue to affect businesses. They warn that consumers should expect to pay more for groceries in the coming months.
