Are Coles and Woolworths shares back in the buy zone?

Are Coles Group Ltd (ASX: COL) and Woolworths Group Ltd (ASX: WOW) shares back in the buy zone as we look to July?

| More on:

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

Coles Group Ltd (ASX: COL) and Woolworths Group Ltd (ASX: WOW) shares have been outperforming in 2020.

While the S&P/ASX 200 Index (ASX: XJO) is down 11.7% this year, Coles and Woolworths shares have climbed 13.1% and 0.6%, respectively.

There are fears over a second coronavirus wave right now, particularly in Victoria. We saw ASX supermarket shares rocket higher earlier in the year, so will this time be any different?

Will ASX supermarket shares soar again?

I'm of the opinion that we won't see the same share price surges that we saw in February.

For one, I just don't think there will be the same level of panic buying this time around. While both Coles and Woolworths have introduced new buying restrictions, there are more options available to Aussies right now.

Restaurants and cafes are starting to re-open, which means more people can eat out now compared to March. That could mean that supermarket sales don't reach the same heights but Coles and Woolworths shares could still climb higher.

What's good about Coles and Woolworths shares?

While I don't think we'll see more surges, we could still see the Aussie supermarket shares finish the year strongly.

A recent SCA Property Group (ASX: SCP) trading update suggested strong turnover from its supermarket tenants up to 31 May 2020. That could be good news for Coles and Woolworths shares in the short to medium-term.

On top of that, Woolworths is working on some impressive automation projects with Qube Holdings Ltd (ASX: QUB). The new automated logistics centre could be a game-changer for operational efficiency for the supermarket giant.

Foolish takeaway

While panic buying may not return in 2020, that doesn't mean supermarket shares won't be worth buying.

If we see more share market volatility, the relatively steady earnings for the Aussie supermarkets could make Coles and Woolworths shares welcome portfolio additions.

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET, Shopping Centres Australasia Property Group, and Woolworths 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.

More on Retail Shares

footwear asx share price on watch represented by look holding shoe and looking intently
Retail Shares

JPMorgan says buy these two undervalued ASX shares with big dividend yields

These stocks have been rated as bargain buys.

Read more »

A little girls sings her heart out on stage with tinsel sparkling behind her, she is a star.
Retail Shares

Do you own Lovisa shares? It's dividend day!

Lovisa shareholders are getting a sparkling payment today.

Read more »

A woman standing on the street looks through binoculars.
Retail Shares

What is the earnings forecast to 2026 for Wesfarmers shares?

This stock could keep making enormous profits.

Read more »

A man and woman in an office look at a laptop and discuss investing, budget strategies or other financial concepts
Retail Shares

How much passive income would $10,000 in Wesfarmers shares generate?

The owner of Bunnings is paying pleasing dividends.

Read more »

a woman wearing fashionable clothes and jewellery checks her phone with a satisfied smile on her face in a luxurous home setting.
Retail Shares

This hot ASX 300 stock is down 30% since February. Is it a buy?

This stock has fallen hard, but should investors buy the dip?

Read more »

A man eases back onto his sofa, happy with the relaxed vibe from his furniture.
Retail Shares

Why I just sold half my shares in this ASX 300 stock even though I still love it!

I’m still a big fan of this business.

Read more »

Two fashionable asx investors dancing among confetti.
Retail Shares

2 'very high-quality' ASX retail shares with significant inside ownership

A fund manager has named two appealing stocks to own.

Read more »

A man sits on a bench atop a mountain with a laptop, making investments with a green ESG mind.
Earnings Results

ASX All Ords stock KMD tumbles as interim dividend cancelled

Investors are hitting the sell button on ASX All Ords stock KMD today.

Read more »