At time of writing, the share price of Coles Group Ltd [ASX:COL] is up a significant 4.7%, trading at $13.41.
The Coles share price has generally traded sideways since it listed:
Let’s take a look at the most important parts of the latest announcement and the company’s prospects going forward.
The one thing that got Coles investors excited today
Perhaps the biggest piece of news that got Coles investors excited today was the company’s trading update.
As per the announcement:
‘Comparable Supermarket sales growth for the fourth quarter is now expected to be in the upper half of the range between the second and third quarter results, adjusted for the impact of New Year’s Eve.’
Additional highlights from today include:
- A non-cash gain resulting from its interest in the Queensland Venue Company Joint Venture of between $100–140 million
- Increased use of data analytics
- Greater focus on Own Brand products
- $1 billion in cost saving by FY23
- Increased emphasis on automation
- Unchanged capital expenditure of between $700–800 million
Where will the Coles share price go from here?
Coles has previously flagged its intention to operate with an attractive dividend pay-out ratio of 80–90%.
As such, it could largely be perceived as a defensive play given the increasing discussion of a possible market crash.
That being said, today’s announcement outlines Coles’ plan for growth as it looks to compete with other major chains such as Aldi and Woolworths Group Ltd [ASX:WOW].
It will be interesting to see how the possibility of an RBA rate cut impacts the Australian economy more broadly.
If it manages to head off (or forestall) a downturn, investors may lose a bit of interest in non-cyclical stocks like Coles.
The main point is this: people don’t stop buying groceries when the economy is weak.
But if the rate cut happens later than expected, Coles could maintain its appeal as a company that has earnings more immune to a market downturn.
As a result, the immediate outlook for the Coles share price appears mixed and dependent on factors external to the company.
For Money Morning
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