Australian Supermarkets History doesn’t repeat itself, but it often rhymes; upgrade Woolworths to Overweight

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Australian Supermarkets History doesn’t repeat itself, but it often rhymes; upgrade Woolworths to Overweight

J P M O R G A N Asia Pacific Equity Research

19 May 2026

Australian Supermarkets

History doesn’t repeat itself, but it often rhymes;

upgrade Woolworths to Overweight

With another geopolitically-induced inflation cycle ahead, the focus will shift from Australia

sales growth to margin differentials. Woolworths is under-earning vs. Coles on

Australian Consumer Sector

EBIT margins, below Coles for the first time in 10 years. We expect Woolworths

to once again leverage its strong position with suppliers to generate gross margin Bryan Raymond AC

expansion as it rolls out its Customer Offer Reset program across a broader range (61-2) 9003-6750

bryan.raymond@jpmorgan.com

of categories. Supplier appetite for Woolworths taking further margin in FY27e/

Christina Kim

FY28e is limited after a large profit transfer in FY22, however COR will (61-2) 9003-7082

directionally drive gross margins higher, the extent to which this occurs is unclear, christina.kim@jpmorgan.com

as is the sales impact. We upgrade Woolworths earnings by 1.2% in FY27e and J.P. Morgan Securities Australia Limited

7.6% in FY28e and stand 3% and 8% above Bloomberg consensus respectively.

Coles’ revisions are more modest (+1.2% in FY27e and +1.5% in FY28e) and stand

~3% ahead of consensus in both FY27e and FY28e. Our Woolworths price target

is lifted to $37.00 as we upgrade from Neutral to Overweight, and we retain our

Overweight on Coles, with a $24.10 price target.

• Inflation to impact grocery industry over four phases. We expect inflation

to accelerate as supplier price rises come through over FY27e. The scale of

inflationary pressure is lower than FY22/23 (~9% peak), but is likely to exceed