Supermarket giant Coles has promised customers it can absorb more price rises as the Iran war drives up costs, as it reported $9.8bn in sales revenue for the first three months of the year.

Posting quarterly sales results to the ASX on Friday, Coles says sales revenue rose 4 per cent for the March quarter, while supermarket price inflation (excluding tobacco) fell from 1.7 per cent to 0.8 per cent.

Although its March sales results beat market expectations, the company warned the Iran war, that started on February 28, was contributing to higher fuel and other commodity input prices.

“In recent weeks, we have seen an increase in supplier cost price increase requests and higher costs within our own operations, particularly in fuel, freight and packaging,” the company said in the statement to the ASX.

“We are actively managing these and will mitigate impacts where possible, while balancing the needs of customers and suppliers.”

Coles chief executive Leah Weckert promised consumers the supermarket giant had room to absorb more price rises.

“We know value and availability will be important to our customers over the months ahead and we are well placed to respond to this with our extensive own brand portfolio, our leading eCommerce platforms and the strength of the infrastructure and capability that sits within our supply chain,” she said in the ASX announcement.

The supermarket price inflation was driven by a drop in prices and abundant supply of popular fruits and vegetables, “easing inflation in packaged groceries”, Coles running more sales, and “price investment” in cleaning and baby products.

Red meat prices continue to rise sharply, also flagged by Woolworths in its results on Thursday, and Coles says it “partially absorbed” beef and lamb price rises.

Shoppers with less money in their pockets will hit liquor sales later in the year too.

The Coles Group owns Liquorland, Vintage Cellars and First Choice Liquor.

“In liquor, sales continue to be impacted by the step down in consumer sentiment observed in March,” the company says.

“As a result, we are currently expecting flow on impacts to Liquor earnings reflecting reduced fixed cost fractionalisation across the second half.”

More to come