Coles Group Shares Test Resistance as Bulls Eye a Breakout

Coles Group shares (ASX: COL) started May with a 3.66% gain to A$22.92 following a solid third-quarter sales update that showcased continued momentum in its core Supermarkets division and a striking acceleration in eCommerce, positioning the stock for a potential breakout above technical resistance at A$23.

The rally marks a decisive test of overhead supply for the Australian supermarket giant, which has spent recent months consolidating gains following a strong first-half profit result. The share price advance came after Coles reported group sales revenue of A$10,703 million for the 12 weeks ending 29 March 2026, representing a 3.1% year-on-year increase that exceeded cautious market expectations amid ongoing cost-of-living pressures across the Australian consumer landscape.

What is driving the Coles share price

Markets responded positively to the detail beneath the headline figure, as supermarkets sales revenue climbed 4.0% to A$9,781 million, with comparable sales up 3.6%, or a more impressive 5.7% when tobacco sales are excluded. The performance represents above-market growth in a fiercely competitive environment, driven by what management described as volume-led expansion rather than pure price increases. Coles renewed 17 supermarkets and opened two new locations during the quarter, extending its national footprint and supporting medium-term sales density.

The standout metric was eCommerce, where sales jumped 24.8% to A$1,327 million, lifting online penetration to 13.6% of supermarket sales, a 226 basis point increase year-on-year. The acceleration underscores a structural shift in shopping behaviour and validates Coles’ multi-year investment in digital infrastructure and last-mile delivery capabilities. Customer engagement metrics also impressed, with the company now counting 10.3 million active Flybuys members and reporting a 75% surge in Coles Plus and Saver subscription sign-ups, suggesting growing loyalty and higher lifetime customer value.

The picture was less rosy in the Liquor division, where sales revenue fell 3.9% to A$781 million and comparable sales declined 4.3%. Weak consumer sentiment, intense promotional activity from competitors, and a broader pullback in discretionary spending have weighed on the segment. Management acknowledged the challenges, signalling that softer trading conditions are expected to persist through the remainder of the financial year and continue to pressure earnings from the division.

Chief Executive Officer Leah Weckert framed the result as evidence of strategic consistency.

Adding that early fourth-quarter supermarket sales trends are tracking broadly in line with the third quarter, providing near-term visibility on the core earnings engine.

Complicated backdrop, yet bulls push on

Coles is working against the backdrop of a complex operating environment, managing rising input costs including fuel, freight, and packaging, all while attempting to balance customer affordability with fair supplier relationships. This tightrope act occurs against a backdrop of heightened political and regulatory scrutiny around supermarket pricing and margins, with the Australian competition watchdog continuing to examine alleged price-gouging practices across the sector. Public sentiment remains mixed, with consumer advocacy groups and social media commentary frequently accusing major grocers of excessive profiteering, even as reported profit margins remain relatively modest by international standards.

From a technical perspective, the move toward A$23 is significant.

A sustained break and hold above this level would represent a breakout from recent consolidation and could attract momentum-driven buying, potentially targeting the A$24–25 zone. Markets will scrutinise the full-year result, due in the coming months, for confirmation that top-line strength is translating into bottom-line growth.

Analysts note that Coles’ first-half result, released in February, showed supermarket EBIT growing 14.6% on sales growth of just 3.6%, demonstrating strong operating leverage and margin recovery. If the company can replicate that conversion in the second half despite higher input costs, the investment case for a defensive growth compounder strengthens considerably.

What Comes Next

Looking ahead, the key questions for markets revolve around sustainability and scale. Can Coles continue to grow supermarket comps above the market without sacrificing margin, particularly if cost-of-living relief measures or competitor aggression intensify? Will eCommerce growth rates hold in the high teens as penetration moves toward 15% and beyond, or will the law of large numbers and fulfilment cost pressures slow the trajectory? And can the Liquor division stabilise and eventually return to growth, or will it remain a structural drag on group returns?

The A$23 resistance level now looms as one to watch, with Coles shares poised for either a breakout that pushes valuation back toward mid-cycle multiples, or a rejection that sends the price back into its recent range while markets await more concrete evidence of margin resilience and earnings momentum.