Coles Group Ltd
(ASX: COL) Share Price and News

Introduction to Coles (ASX:COL)

Coles Group is one of Australia's Big 2 supermarket chains. It is headquartered in Melbourne and has over 1,800 retail outlets in Australia.

Coles operates its namesake supermarkets as well as bottle shops Liquorland, First Choice Liquor Market, and Vintage Cellars. It also has the Flybuys program that seeks to rewards loyal customers with various points redemption options and also makes more money for the company. With the rise of eCommerce, Coles has also begun offering online shopping services.

Coles' Company History

The company was founded in 1914 by George Coles in Melbourne, opening its first store in Smith Street, Collingwood. It rapidly grew through the 20th century, from a variety store to the self-service supermarkets we know today.

By the mid 1980s, made a series of acquisitions including Bi-Lo and Myer, renaming itself Coles Myer. It also established liquor interests under Liquorland and Vintage Cellars. The Flybuys scheme was launched in 1993 and its Coles Express service stations were launched throughout the mid 2000s. In 2006, it sold Myer and the company was acquired by Wesfarmers 12 months afterwards.

In 2018, it demerged and became a standalone ASX-listed company. As of mid-March 2024, it is 30% higher since the demerger, although there have been fluctuations since then.

Together with Woolworths, it holds a 90% share in Australia's grocery market. Despite being only 60% of the size of Woolworths by market cap, it is seeing faster sales growth than Coles with 4.9% growth in the first 2 months of CY24, while Woolworths saw just 1.5%.

Future Outlook of Coles

Coles is in a fascinating position. On one hand, it has an effective duopoly that will be difficult to challenge (sorry Aldi and IGA), and it can is easily able to pass on any price increases to customers.

The other, it has copped significant scrutiny from regulators of late with a current Senate inquiry into supermarket pricing. Only time will tell what will come of that.

Coles also faces a challenge with the rise of eCommerce, keeping up with Woolworths in offering Click and Collect services and home shopping to consumers.

Is Coles a Good Stock to Buy?

Coles Group remains an intriguing option for income-focused investors, boasting a solid track record of delivering consistent dividends and offering faster growth than Woolworths right now.

However, prudent investors (especially technical investors) may eye a more favourable entry point, considering the potential for fluctuating profit margins in the short term due to operational challenges.