(Reuters) -Australian grocer Coles on Tuesday reported a robust start to the financial year as demand for value campaigns drove sales at its top money-making division, supermarkets, sending its shares 8% higher in early trade.

Coles said sales revenue at the division grew 4.9% in the first eight weeks of the business year, outpacing the Visible Alpha consensus forecast of 3.6% for the first six months.

In the year ended June 29, the division generated revenue of nearly A$40 billion ($25.99 billion), 4.3% higher than a year earlier on a normalised basis, and 5.7% after excluding tobacco.

Australia's second-biggest grocer by market capitalisation after Woolworths also declared a final dividend of 32 Australian cents a share - the same as last year - bringing the full-year payout to 64 cents, in line with market expectations.

That sent its share price 8% higher in early trade to A$22.40 - its biggest one-day rally since March 2020. Coles was the top gainer in the ASX 200 benchmark index, which as of 0030 GMT was trading slightly lower versus a day earlier.

"Overall feels more optimistic in tone of release, with a strong start to FY26 and signs of improving sales all supportive of operating leverage beginning to flow through the P&L (profit and loss)," Jarden analysts led by Ben Gilbert wrote in a client note.

However, a 30% decline in tobacco sales during the year, alongside higher financing, lease and wage expenses, had an impact on the grocer's overall earnings.

Net profit after tax attributable to shareholders was A$1.08 billion in fiscal 2025, versus A$1.12 billion a year prior and below the Visible Alpha consensus estimate of A$1.11 billion.

New laws aimed at curbing smoking have triggered illicit tobacco consumption, denting legal sales, Coles said.

Tobacco sales made up less than 3% of the supermarket division's sales revenue in fiscal 2025, versus 8% in 2019. The slowdown continued into early 2026, with the division's sales growth at 7% excluding tobacco and about 5% including it.

"Strong growth in sales has been partially offset by a further decline in tobacco as a result of the impact of the new tobacco legislation and growth in the illicit market," the Melbourne-based supermarket chain said in a statement.

Woolworths will report full-year earnings on Wednesday.

($1 = 1.5389 Australian dollars)