# Aussie supermarkets set to capitalise on high inflation, but softer demand ahead Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2023-02-20 Category: NEWS Category URL: https://financedigest.com/category/news Meta Title: Australian supermarkets to see profit boost amid high inflation Meta Description: Analysts predict increased profits for top supermarket chains in fiscal 2023 half-year, despite challenges from mounting expenses and global inflationary URL: https://financedigest.com/aussie-supermarkets-set-to-capitalise-on-high-inflation-but-softer-demand-aheadhtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2023-02-20t043839z2lynxmpej1i0bqrtroptp4wesfarmers-results-1736814434046-compressed.jpg) By Harshita Swaminathan (Reuters) – Australian supermarkets will reap bigger profits in fiscal 2023 half-year due to decades-high inflation and increased savings, but analysts warned of a rough second-half as households reel from mounting expenses due to higher cost of living. Top supermarket chains Woolworths Group and Coles Group will likely see growth in their half-year profit, according to analyst estimates, helped by higher shelf prices and lower COVID-19 related costs. Australian [households face higher grocery and energy bills](https://www.financedigest.com/44-of-uk-households-are-worried-theyll-have-to-foot-the-bill-for-net-zero.html "44% of UK Households are Worried They’ll Have to Foot the Bill for Net Zero") due to global inflationary pressures, while budgets are further squeezed by higher mortgage payments because of the central bank’s rate hikes aiming to quell inflation. The hikes have added A$900 a month in repayments to the average A$500,000 mortgage, [according to an estimate](https://www.financedigest.com/global-natural-disaster-losses-reach-45bn-during-1h-2018-insurance-payouts-estimated-at-21bn-according-to-aon-catastrophe-report.html "Global natural disaster losses reach bn during 1H 2018; insurance payouts estimated at bn, according to Aon catastrophe report"). There’s a bit of a disconnect between confidence and reality at the moment – the confidence [levels are low](https://www.financedigest.com/optimism-levels-drop-to-low-of-17-percent-according-to-first-survey-since-banking-regulations.html "Optimism levels drop to low of -17 percent, according to first survey since banking regulations"), but people are still spending. So I think [outlook statements will be cautious”](https://www.financedigest.com/recruiter-hays-boosted-by-record-net-fees-but-cautious-on-outlook.html "Recruiter Hays boosted by record net fees, but cautious on outlook") said Matthew Haupt, a lead portfolio manager whose WAM Leaders fund has holdings in Woolworths and Coles. Haupt said high household [savings after the government handed out stimulus checks during the pandemic has kept Australians spending despite higher](https://www.financedigest.com/five-reasons-to-start-saving-early-for-higher-education.html "Five Reasons to Start Saving Early for Higher Education") prices, but once rates peak and mortgage payments top out, retailer top-lines may shrink. Woolworths said food [prices over the September quarter](https://www.financedigest.com/greek-residential-property-price-recovery-picks-up-in-third-quarter.html "Greek residential property price recovery picks up in third quarter") rose 7.3%, while Coles reported a 7.1% rise. Australia reported [headline inflation](https://www.financedigest.com/boes-mann-falling-headline-inflation-high-core-make-policy-difficult.html "BoE’s Mann: Falling headline inflation, high core, make policy difficult") of 7.8% in the December quarter, a 33-year high. A [return to in-store shopping is also expected](https://www.financedigest.com/lufthansa-expects-further-significant-improvement-after-return-to-profit.html "Lufthansa expects further ‘significant improvement’ after return to profit") to improve margins, according to analysts at Macquarie, as in-store margins are usually better than online. Analysts at Citi also expect benefits from [selling prices](https://www.financedigest.com/3-tricks-to-get-a-better-price-when-selling-your-car.html "3 Tricks To Get a Better Price When Selling Your Car") rising faster than cost bases. As spending power reduces over the second-half, electronics retailers were seen feeling the pinch disproportionately, as [later confirmed by JB Hi-Fi reporting slower sales growth and flagging an “uncertain period” ahead](https://www.financedigest.com/dollar-dips-ahead-of-inflation-data-later-this-week.html "Dollar dips ahead of inflation data later this week"). We are [concerned that the rising](https://www.financedigest.com/shares-rise-but-concern-mounts-over-inflation-flare-up.html "Shares rise, but concern mounts over inflation flare-up") cost of living, fixed rate mortgage roll-offs and normalising service consumption erode consumer discretionary spending in the second half of calendar 2023,” analysts at Macquarie said. Retail conglomerate Wesfarmers’ main earner, Bunnings, reported only a slight pickup in [profit and Wesfarmers relied on a recovery in Kmart, which was under lockdown in the previous period, for profit growth](https://www.financedigest.com/contract-caterer-compass-expects-2023-profit-growth-to-top-20.html "Contract caterer Compass expects 2023 profit growth to top 20%"). Coles and Woolworths are [expected to report half-yearly earnings](https://www.financedigest.com/italian-hearing-aid-maker-amplifon-expects-higher-2023-earnings.html "Italian hearing aid maker Amplifon expects higher 2023 earnings") on February 21 and 22, respectively. Brokerage estimates: 1H23 estimates Woolworths Coles Macquarie A$842 million A$568 million Goldman Sachs A$893 million A$542 million UBS A$871 million A$555.2 million Jefferies A$881 million A$584 million Average A$871.75 million A$562.3 million 1H22 reported A$676 million A$549 million (Reporting by Harshita Swaminathan in Bengaluru; editing by Diane Craft) --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---