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The Coles Group share price is up almost 9% this week

The Coles Group Ltd (ASX: COL) share price is on course to finish the week on a positive note. In afternoon trade the supermarket giant’s shares are up 3.5% to $12.53.

This latest gain means that the newly listed company’s shares are up almost 9% this week.

Why is the Coles share price on the rise again?

With no news out of the company, today’s gain appears to be attributable to a broker note out of the Macquarie Group Ltd (ASX: MQG) equities desk earlier this week.

According to that note, the broker has upgraded its shares to an outperform rating from neutral with a $13.48 price target.

Even after its strong gain this week, this price target still implies potential upside of over 7.5% for its shares excluding dividends. With dividends this potential 12-month return stretches beyond 12.5%.

Why is Macquarie bullish on Coles?

Macquarie adjusted its recommendation after visiting the new Woolworths Group Ltd (ASX: WOW) automated distribution centre in Dandenong, Victoria.

Its analysts were very impressed with what they saw at the distribution centre and believe that the operational benefits it will provide Woolies will also apply to Coles in the future when it completes the build of two new distribution centres.

One of the major benefits of the automated distribution centre is the reduction in employees. Instead of 700 full time employees in a manual distribution centre, these centres are expected to employ just 150 full time employees.

Should you invest?

Although its shares are no longer the bargain buy they were this time last week, I still see value in them at this level and believe they would be worth considering.

This is especially the case if you’re an income investor. Macquarie estimates that Coles’ shares currently offer investors a generous fully franked 5.2% dividend.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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