The Motley Fool

Is the Coles share price a buy?

Is the Coles Group Limited (ASX: COL) share price a buy?

Since the start of March 2019 the Coles share price has risen by 11.9%, so it shows that even a supposed defensive share like Coles can sometimes deliver quick double digit returns.

The release of the 2019 half-year report was the start of the share price growth we have seen recently.

The December 2018 result was the 45th consecutive quarter of supermarket comparable sales growth with group sales up 2.6%.

Coles’ main two divisions delivered earnings before interest and tax (EBIT) growth. Supermarket EBIT grew by 0.4% to $602 million and Liquor EBIT increased by 7%, however Coles Express experienced a 39.3% decline of EBIT to $51 million, but this is unlikely to be repeated, in-fact it could be reversed in coming months with the new deal.

In the March 2019 quarter, Coles delivered further supermarket and liquor growth. The Supermarkets division grew sales by 3.2% with comparable sales growth of 2.4%. Liquor sales grew by 4.3% with comparable sales growth of 3.5%.

Interestingly, Coles Supermarkets actually experienced price inflation of 0.9%, although excluding tobacco and ‘fresh’ prices declined by 0.9%. Sales per square metre also grew by 0.9%.

I think one of the most promising things about Coles’ medium-term future is the new exclusive partnership with Ocado Group to bring the world’s leading online grocery platform, automated single pick fulfilment technology and home delivery service to the country.

Under the agreement, Coles’ two planned fully automated ‘Customer Fulfilment Centres’ will be built, one located in each of Melbourne and Sydney prior to the end of FY23.

Improving efficiencies, eCommerce capabilities and economies of scale is imperative for a part-logistics business like Coles.

Foolish takeaway

Coles is currently trading at 20x FY20’s estimated earnings with a projected grossed-up dividend yield for FY20 of 6%. Coles is looking a little too expensive for me at the moment, I don’t think it’s a buy today and nor is Woolworths Group Ltd (ASX: WOW).

For solid ASX shares at attractive prices, I think these quality ASX shares are better ideas.

Our Top 3 ASX Blue Chip Shares For 2019 

You’re invited! For a limited time, The Motley Fool Australia is giving away an urgent new investment report detailing our 3 TOP BLUE CHIP SHARES to own in 2019.

So if you like trustworthy, stable, high-performing companies that pay fat fully franked dividends – we’ve got you covered!

Stock #1 is a beloved old Australian company turning its attention to high-margin businesses... and rapidly returning cash to shareholders with its hefty dividend...

While Stock #2 is an online powerhouse that’s rapidly gaining market share all around the globe... poised for years (or even decades) of tremendous growth...

Even better, Stock #3 offers a whopping 6.5% grossed-up dividend! Which beats the rates on term deposits right out of the water – and offers the potential for capital gains, too.

You can discover all three shares inside our new report right now. To scoop up your FREE copy, simply click the link below right now. But you will want to hurry – this free report is available for a LIMITED TIME ONLY!


Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended 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.

NEW. Five Cheap and Good Stocks to Buy in 2019…

Our Motley Fool experts have just released a brand new FREE report, detailing 5 dirt cheap shares that you can buy today.

One stock is an Australian internet darling with a rock solid reputation and an exciting new business line that promises years (or even decades) of growth… while trading at an ultra-low price…

Another is a diversified conglomerate trading near a 52-week low all while offering a 2.8% fully franked yield…

Plus 3 more cheap bets that could position you to profit over the next 12 months!

See for yourself now. Simply click the link below to scoop up your FREE copy and discover all 5 shares. But you will want to hurry – this free report is available for a brief time only.