Can Coles Group share price outperform the ASX 200 on its new 'Little Shop' promo?

Coles Group Ltd (ASX: COL) shareholders will be hoping it can replicate the success of its original "Little Shop" mini collectables promotion over this festive period. But don't get your hopes up.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

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.

Motley Fool contributor Brendon Lau 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.

More on Share Market News

Stock market chart in green with a rising arrow symbolising a rising share price.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a massive day for the ASX 200, with a new all-time high recorded.

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Technology Shares

This ASX tech stock rocketed 60% in March! Can it keep on delivering?

After soaring in March, the ASX tech stock is now up 169% since this time last year.

Read more »

Broker Notes

Brokers name 3 ASX shares to buy now

Here's why brokers are feeling bullish about these three shares this week.

Read more »

A young man clasps his hand to his head with his eyes closed and a pained expression on his face as he clasps a laptop computer in front of him, seemingly learning of bad news or a poor investment.
Share Fallers

Why Burgundy Diamond Mines, Clarity Pharmaceuticals, EML, and Zip are sinking today

These ASX shares are ending the week in the red. But why?

Read more »

A young women pumps her fists in excitement after seeing some good news on her laptop.
Share Gainers

Why Mesoblast, Newmont, Pilbara Minerals, and Platinum shares are jumping

These ASX shares are ending the week strongly. But why?

Read more »

a young boy dressed up in a business suit and tie has a cute grin and holds two fingers up.
Opinions

2 of my top ASX 200 shares to consider buying before April

I would happily exchange dollars for these two shares right now.

Read more »

Father in the ocean with his daughters, symbolising passive income.
Dividend Investing

I'd spend $8k on these ASX 200 shares today to target a $6,102 annual passive income

I believe these ASX 200 shares will continue rewarding passive income investors for years to come.

Read more »

Three businesspeople leap high with the CBD in the background.
Share Market News

Boom! ASX 200 blasts to new record highs

ASX 200 investors just sent the benchmark index into uncharted territory.

Read more »