Coles' Market Share Gains Narrow as a Discount Court Loss Bites

Fund managers say Coles' long run of outperforming Woolworths is closing just as a costly ACCC court loss adds fresh legal risk

30 Jun 2026 · 4 min read

After a long run of outperforming rival Woolworths, Coles Group saw that gap narrow through 2026, just as a court loss over misleading discount claims added a fresh legal risk to the stock.

A sustained run of market share gains

Tyndall Asset Management's August 2025 update described Coles continuing to outperform Woolworths in both sales and margins through the first eight weeks of FY26, attributing the gap to better management execution. Pendal Group's November 2025 update confirmed the trend held into the AGM season, with supermarket sales growth of 4.8 per cent, or 7 per cent excluding tobacco, in the first quarter, and management indicating similar momentum continuing into the second quarter, with Coles still winning share from Woolworths.

The gap begins to close

Ten Cap exited its position in January 2026, seeing limited near-term upside at prevailing valuation levels as earnings momentum moderated and margin expansion appeared constrained. By February, Ten Cap had rotated the other way entirely, buying Woolworths and selling Coles, arguing the relative valuation upside had shifted toward Woolworths heading into the reporting season. Alphinity Investment Management confirmed the same pivot in March 2026, switching preference from Coles to Woolworths after 18 months, on research suggesting Coles' gains were already priced in while Woolworths was just beginning a new growth phase under fresh leadership.

The team has made some tactical moves in the supermarket space, recently switching preference from Coles to Woolworths after 18 months. Research suggests Coles had already seen its gains priced in, while Woolworths is just beginning a new growth phase under fresh leadership.

— Alphinity Investment Management, Article, March 2026

A losing bet on ACCC discount claims

Pendal Group's May 2026 update reported a serious legal setback: Coles lost its defence against ACCC allegations of misleading fake discounts, with the court ruling in the regulator's favour in 13 of 14 sample cases drawn from over 200 alleged instances. Pendal noted fines had yet to be determined but were likely to exceed the $120 million penalty imposed on Qantas over cancelled flights, given the court's finding that the misleading promotions were a planned company outcome rather than an isolated error.

Coles lost its defence again the ACCC alleging the company misled consumers with 'fake' discounts. The court ruled in favour of the ACCC in 13 of the 14 samples cases (from over 200 alleged). Fines have yet to be determined but are likely to be well in excess of the $120 million fine to Qantas for cancelled flights, given the Coles promotions were a planned outcome by the company.

— Pendal Group, Newsletter, May 2026

A contested view on where the growth thesis stands

By June 2026, several managers had settled into a hold stance. Plato Investment Management argued the thesis of Coles outperforming Woolworths had largely played out as its rival lifted its own execution, while flagging rising Fair Work Commission-mandated wage costs as a headwind. Investors Mutual Limited took a similarly neutral view but preferred Coles over Woolworths purely on valuation grounds, expecting a moderation in margin improvement offset by continued mid-single-digit earnings growth. First Sentier Investors remained more bullish, praising CEO Leah Weckert's strategy execution and describing the business as rock solid, while Alliance Bernstein saw Coles benefiting from a broader June 2026 rotation into defensive domestic earners amid market volatility.