Successful First Quarter for Coles Drives Wesfarmers’ Share Price Up

Wesfarmers Limited‘s [ASX:WES] share price is up slightly this morning, following the release of its first quarter results for 2019 this morning.

At time of writing, Wesfarmers’ shares are up 3 cents from the prior closing price — currently trading at $47.36.

The strong results for the supermarket chain support the potential demerger of Coles, which shareholders are set to vote on next month.

Coles’ promising results

The supermarket chain reported record sales for the first quarter, up 5.8% to the year prior. Along with 5.1% increase in food sales.

This was a result of a ‘highly successful’ Coles Little Shop campaign, better in-store execution and Flybuys promotional campaigns.

Managing Director of Wesfarmers, Rob Scot said:

Strong growth in basket size, transaction numbers and units sold, as well as improvements in fresh market share supported the sales result. Coles’ liquor and convenience segments also recorded headline sales growth for the quarter.

The result for the first quarter was pleasing as it demonstrated the ability of the Coles team to continue to focus on improving in-store execution while preparations continued for the proposed shareholder vote on the demerger of Coles’.

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What will a demerger mean for Wesfarmers’ shares?

If the demerger is successful, Wesfarmers will retain minority ownership interest of 15% in Coles and 50% of Flybuys.

In a recent update, Wesfarmers said that they expect the demerger to position both companies’ portfolios for success over the next decade, creating a new top 30 ASX-listed company.

Separating the supermarket chain from the Wesfarmers group will allow the company to focus on growing its other brands, which will in turn create more value for shareholders.

Judging by Wesfarmers confidence in the demerger, it seems investors may have nothing to fear.

Matt Hibbard,

For Money Morning

PS: You’ll find over 2,000 stock listed on the ASX and on any given day a bunch will rise, just like Wesfarmers. It’s near impossible to monitor these on your own. Our analyst Sam Volkering has picked out four Aussie stocks he believes could be top performers in 2018. Check out his free report The Four Best ASX Stocks for 2018’.

Matt Hibbard is Money Morning’s income specialist. With nearly three decades in the markets, Matt has traded just about every asset class there is. The one thing that has stuck with him over this time is a very simple premise. That is, it’s the cash a company generates that ultimately determines its value. Sure, some stocks might fly away to multi-digit gains. But unless these companies can convert the ‘story’ into real money, the market will eventually find them out. And when that happens, the share price quickly falls back to Earth. Matt is also the editor of Options Trader, where he shows subscribers how to use basic options strategies to generate income. This is income they can generate on top of regular dividend payments. Matt doesn’t play the prediction game, where the aim is to be proven ‘right’. Instead, his goal is to generate as much income as he can for his subscribers, irrespective of whether the market is going up or down.

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