Supermarket operator Coles has reported a 8.3 per cent rise in annual profit to $1.1 billion even as shoppers are hit with a cost-of-living crisis and the supermarket itself is subjected to a senate inquiry investigating  price setting and supplier relations.

In its annual results released on Tuesday, revenue too increased 4.4 per cent for the year to $43.6bn. Australia’s second-largest supermarket chain expanded its profit margins from its supermarket business to 5.2 per cent from 4.8 per cent a year ago despite Australians eating less meat.

“There have been a number of challenges throughout the year, including changing customer behaviour, increased external scrutiny and cost inflation,” said chief executive Leah Weckert.

Household financial pressure was “front of mind”, added Weckert. With recent updates that the RBA is unlikely to reduce the cash rate this year, the financial strain of prolonged high interest rates is putting on middle-income households is increasing.

Weckert said that Coles reduced prices on “hundreds” of essential and popular items. An Australian Council of Trade Unions inquiry earlier this year found that at supermarkets between March 2021 and September 2023, price increases for items like cheese, bread, milk, eggs, dairy products and breakfast cereals varied between 19 per cent and 27 per cent.

At its flagship supermarkets arm for 2024, sales rose 6.2 per cent to $39.042bn. Sales in the fourth quarter increased 10.1 per cent.

The Coles Group includes Coles and Coles Local stores, Liquorland, First Choice Liquor Market and Vintage Cellars.

Revenue derived from its liquor businesses was up by a modest 0.5 per cent in 2023-24. Sales at its liquor arm rose 2.3 per cent to $3.69bn as earnings fell 6.5 per cent to $261m.

Coles Group has spent more than $1.4bn building two automated warehouses in Queensland and Sydney and two automated customer collection warehouses in Sydney and Melbourne.

One of the areas that is contributing to Coles’ growth is its digital sales. Coles reported a 30 per cent jump in e-commerce sales, totalling $3.7 billion in e-commerce supermarket sales in the 53 weeks to June 30, up from $2.8 billion in 2022/23.

Online sales constituted 9.4 per cent of all sales, up from 7.5 per cent the year before.

After being dragged through a senate inquiry earlier this year, Coles has brought in changes, most notably to its supplier payment terms. It, along with other major supermarkets including Woolworths and Aldi, have to abide by a mandatory Food and Grocery Code of Conduct.