Coles sees strong demand in home brand, keeps 'eye on' tariff ripple effects

By Rishav Chatterjee and Adwitiya Srivastava

(Reuters) -Australian supermarket chain Coles' chief said on Wednesday that shoppers remain sharply focused on value, driving strong quarterly growth in its premium home-brand line, while it keeps a close eye on potential impacts from global tariffs.

CEO Leah Weckert flagged that while the company is not directly affected by tariffs levied by U.S. President Donald Trump, it has been "keeping an eye on" indirect effects of the global trade war, such as on beef production.

The company's latest survey had shown a "modest uptick in terms of how people are feeling ... although I would say that some of the events from the U.S. and around the tariffs are probably offsetting that - the uncertainty that is bringing," she told reporters on a conference call.

Coles reported third quarter group sales of A$10.38 billion ($6.64 billion), 3.4% higher than last year, reflecting strong growth at its supermarket business on higher volumes.

Weckert said customers were looking for more affordable options, resulting in a 13.7% rise in sales at Coles Finest, the company's premium home brand.

Coles said product availability improved during the quarter as new automated distribution centres came online, while warehouse enhancements contributed to a smoother experience for online shoppers.

Analysts at Jefferies said the quarterly result was a solid outcome given sales accelerated from a relatively strong base in the same quarter a year earlier.

Investors, however failed to cheer the results, with the Coles stock trading 1.3% lower in Sydney.

The grocer flagged that supermarket sales growth in the fourth quarter remained broadly in line with the previous three months.

"The Q4 outlook appears to be running in line with Q3 at this stage, which again is decent but fell short of wowing investors and that's why Coles' stock price had a hard time garnering much enthusiasm today," said Tim Waterer, market analyst at KCM Trade.

($1 = 1.5625 Australian dollars)

(Reporting by Rishav Chatterjee and Adwitiya Srivastava and John Biju in Bengaluru; Editing by Alan Barona and Sonali Paul)