Shareholders in our second-largest supermarket chain will be hoping that it can replicate the success of its original "Little Shop" mini collectables promotion over this festive period.
The Coles Group Ltd (ASX: COL) share price couldn't stave off the broader market weakness though as the Coles share price fell 1.9% to $12.36 during lunch time trade despite the company launching its Christmas Little Shop campaign.
In contrast, the Woolworths Group Ltd (ASX: WOW) share price is down by a similar amount at $28.71 while the Metcash Limited (ASX: MTS) share price is shed 1.6% to $2.40 and the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index is 1.8% lower.
Can investors expect a big sales boost?
The second edition of the Coles Little Shop campaign is creating a buzz as a check with my local Coles supermarket confirmed that the collector case sold out over the weekend.
The collector case is the hardest item to get and strong interest in the product is a good sign for the challenger supermarket as it tries to play catch-up to archrival Woolies.
However, I think this Christmas campaign won't deliver as big a bump in sales as the original for a few reasons.
The first is that the collection is limited to five mini collectables compared to 30 in the last round. This means a much shorter sales campaign, and thus, a smaller sales bump.
The second reason is that the Christmas mini collectables are all of Cole's generic products while the original promo had 28 mini collectables that were of well-known household brands like Nutella.
This is likely to limit the appeal to collectors.
Thirdly, the campaign has to compete against Woolworths after the it launched its Christmas pop-out collectables promotion earlier this month.
The first Little Shop promo had a clear run as Woolworths didn't have similar sales campaign at that time.
The original Little Shop campaign lifted Cole's comparable sales growth in the September quarter by a whopping 5.1% compared to the 1.8% increase it reported in the previous quarter.
Foolish takeaway
While the sale lift may not be anything like the last time, I think the Coles share price is cheap as it is trading at too big a valuation discount to Woolworths.
Coles management also has more to prove (and lose) and that means it will be willing to undertake more aggressive strategies to win market share.
Further, I suspect we will see a third and bigger Little Shops campaign in the next quarter. The question is whether consumers will have become Little Shopped-out by then.
