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Coles share price on watch after unveiling its refreshed strategy

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The Coles Group Ltd (ASX: COL) share price will be on watch today following the announcement of the supermarket giant’s refreshed strategy at its first investor day event since the demerger from Wesfarmers Ltd (ASX: WES).

Here’s a summary of Coles’ new strategy:

The refreshed strategy aims to deliver on its vision of becoming the most trusted retailer in Australia in order to grow long-term shareholder value.

The strategy is based on three pillars: Inspire Customers through best value food and drink solutions to make lives easier; Smarter Selling through efficiency and pace of change, and Win Together with its team members, suppliers and communities.

Management expects the Smarter Selling pillar to deliver $1 billion in cumulative savings by FY 2023. This will be achieved through initiatives including the use of technology to automate manual tasks and simplifying above-store roles to remove duplication, allowing Coles to offset the impact of rising costs including energy and labour.

Coles will also optimise its store network to increase sales density and improve profitability, tailoring upwards of 40% of its floor space in stores to meet the needs of local customers.

Coles Group CEO, Steven Cain, said: “Our strategy will truly differentiate Coles in the Australian retail market, allowing us to lead in Online through an optimised network, as well as making Coles an Own Brand Powerhouse and a destination for health. It will also provide long term structural cost advantages while making us Australia’s most sustainable supermarket.”

Trading update

As well as releasing its strategy update, the company also provided an update on trading in the fourth quarter.

According to the release, comparable supermarket sales growth for the fourth quarter “is now expected to be in the upper half of the range between the second and third quarter results, adjusted for the impact of New Year’s Eve.” This implies fourth quarter comparable sales growth above 1.85%.

Net capex guidance for FY 2019 is unchanged at $700 million to $800 million.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended COLESGROUP DEF SET and Wesfarmers Limited. 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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