Coles (ASX:COL) share price on watch following strategy update

The Coles Group Ltd (ASX: COL) share price will be one to watch on Thursday. This follows the release of …

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The Coles Group Ltd (ASX: COL) share price will be one to watch on Thursday.

This follows the release of the supermarket giant’s strategy update this morning.

What was included in its update?

Coles provided the market with an update on its Refreshed Strategy, which was announced in 2019.

According to the release, the company is tracking well against most key strategic metrics. One of those is its sales density target. In FY 2019 its supermarkets were generating sales of $16,704 per share metre. This has now improved 6.5% to $17,789 per square metre.

Also progressing well is its cost cutting. Coles is targeting a $1 billion reduction in costs by FY 2023. Today, management advised that it is on track to deliver in excess of $550 million in cost savings by the end of FY 2021. Supporting this has been the optimisation of its stores and supply chain through artificial intelligence and the opening of innovative store formats.

Another metric that has been improving is customer satisfaction. Customer satisfaction has lifted from 88% in FY 2019 to 90% today.

And while the company’s market share is below target and has softened since FY 2019, management notes that this has been driven by COVID-19 headwinds. Having fewer neighbourhood stores and more metro and shopping centre stores impacted its market share at the height of the pandemic. However, the local shopping trend is now unwinding and management appears to be expecting market share growth to resume.

Online shopping update

Coles also gave investors an update on its online business, revealing strong growth in its customer numbers, penetration, and sales.

But it isn’t stopping there. It is continuing to invest in Click & Collect and its home delivery service. In respect to the latter, same day delivery will soon be available in over 400 stores and the company is aiming to increase its regional delivery capacity and reach.

Positively, it notes that its Ocado partnership is going to enable a step-change in ecommerce. It expects the partnership to double its online product range, expand delivery slots and locations, and support best-in-channel economics and operating costs.

Though, this will come at a cost. Management is expecting its capital expenditure to increase to $1.4 billion in FY 2022. It also expects its depreciation to rise to $1.7 billion. 

Nevertheless, management appears confident the actions it is taking with create value for shareholders in the future.

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James Mickleboro does not own any shares mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended COLESGROUP DEF SET. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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