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Is the Coles (ASX:COL) share price set for a big Santa Rally?

businessman handing $100 note to another in supermarket aisle representing woolworths share price
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Christmas could come early for the Coles Group Ltd (ASX: COL) share price on reports that it’s gearing up for record sales during the holiday season.

The supermarket chain is anticipating record sales as it will have one million more mouths to feed in December and January, reported the Australian Financial Review.

The news report is yet to inspire investors as the Coles share price slipped 0.9% to $17.92 during lunch time trade.

In contrast, the Woolworths Group Ltd (ASX: WOW) share price gained 0.7% to $39.09 and the Metcash Limited (ASX: MTS) dipped 0.2% to $3.

Coles share price gears for one million extra shoppers

Readers on this site shouldn’t be surprised about the big Christmas supermarket rush. I’ve reported last week about this “phenomenon” with Credit Suisse upgrading Coles shares to “buy”.

Australia will have a full house this festive season as Aussies can’t go on their regular overseas vacation due to COVID-19.

The federal and state governments are running campaigns to convince locals to holiday domestically instead. This is not only good news for the local tourism industry, but for our supermarkets too.

How this Christmas will be different

But this tailwind may not be as strong as some bulls like to believe. The chief executive of Coles, Steve Cain, told the AFR that says celebrations are likely to be smaller due to social restrictions.

Also, the economic impact from the pandemic is pushing more Aussies onto struggle street.

Coles is planning the Christmas shopping bash, including a new collectables program, with these factors in mind.

It’s doing this by offering smaller serving sizes and semi-prepared food like prosciutto-wrapped saddle of lamb and stuffed Tasmanian salmon roast.

“We think this will be the biggest Christmas ever by far, given the circumstances – it will be a lot better than Easter,” Mr Cain told the AFR.

“With one million more Australians around, and with a more limited food service offering, this year it’s going to be a summer of more frequent, smaller entertaining going on – that’s what we’ve tried to cater for.”

Read through for the Woolworths share price

You can bet that Woolies will be thinking the same thing! I have also heard anecdotally that Woolworths is reducing staff hours at some of its Melbourne stores.

I don’t think it’s due to weakening sales, even though sales are cycling through a COVID high, but an effort to pad margins.

Margins are the key thing I will be looking at for Woolworths as its recent results showed a lack of operating leverage. This is probably due to a sharp but temporary increase in costs to operate in a COVID stricken world.

The proof will be in the Christmas pudding.

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Returns As of 6th October 2020

Motley Fool contributor Brendon Lau owns shares of Woolworths Limited. Connect with me on Twitter @brenlau.

The Motley Fool Australia owns shares of COLESGROUP DEF SET 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.

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