Coles Group (ASX:COL) fiscal H1 earnings exceeded market estimates by 0.5%, driven by strong supermarket performance, and its consensus estimates are expected to rise modestly on a better outlook and improved margins, according to a Thursday note by Jarden Research.

The retailer reported Thursday that its earnings per diluted share in the fiscal first half fell to AU$0.43, from AU$0.44 per diluted share a year earlier, Analysts polled by Visible Alpha were expecting an EPS of AU$0.42.

Sales revenue for the 27 weeks ended Jan. 5 was AU$23.04 billion, up 4% from AU$22.22 billion in the previous comparable period. Analysts surveyed by Visible Alpha expected AU$22.85 billion.

Earnings before interest and taxes (EBIT) in the supermarket segment were about 3% ahead of expectations, fueled by improved margins and loss reduction initiatives, Jarden noted.

The company also reiterated its full fiscal year capital expenditure guidance of AU$1.3 billion, Jarden added.

Jarden believes that Coles benefits from lower shrink, initiatives like Simplify and Save to Invest programs, and well-controlled costs.

The firm has a neutral rating on Coles and a price target of AU$16.90.

Shares fell past 3% in recent Friday trade.