Why the Coles (ASX:COL) share price is pushing higher today

What’s driving the Coles share price higher on Thursday?

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Family having fun while shopping for groceries.

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The Coles Group Ltd (ASX: COL) share price is on the rise this afternoon, adding 1.94% to sit at $16.85 at the time of writing.

Its advance comes after the successful demerger of supermarket rival, Woolworths Group Ltd (ASX: WOW).

The demerger will see Woolworths shareholders receive one Endeavour Group Limited (ASX: EDV) share for every Woolworths share they own.

What’s driving the Coles share price?

Last Thursday, the Coles share price took a ~4.50% tumble following the company’s strategy update announcement.

The seemingly positive announcement provided updates including progress on sales per square metre, cost cutting and customer satisfaction.

The update also revealed “rapidly growing online grocery sales” with planned investment to further drive its ecommerce sales.

Despite the harsh sell-off last Thursday, Goldman Sachs believes that Coles is well positioned in the short-term, to benefit from consumers returning to supermarkets. The broker had a buy rating for Coles shares on 18 June with a $19.40 target price.

Furthermore, the Australian Bureau of Statistics (ABS) revealed its preliminary May retail trade figures, highlighting a strong uplift in food retailing.

Its results note that Australian retail turnover increased 0.1% in May 2021, with a 1.5% increase in food retailing driving the increase.

More specifically, Victoria experienced a 4.0% lift in food retailing, likely driven by its lockdown starting late May.

The strong performance out of the food retailing industry could be a factor supporting ASX-listed supermarkets.

A long way to go for the Coles share price

Despite pushing out some gains today, the Coles share price is still down about 9% year-to-date.

Coles is making a slow recovery as consumer spending habits normalise. Its management said in response to it third quarter results:

Early signs of normalising consumer behaviour were observed including improved transaction growth, a recovery of COVID-19 impacted categories such as impulse, convenience and food-to-go, Sunday returning to be the busiest trading day of the week and positive indicators of the unwind of ‘local shopping’ as customers returned to shopping centres and CBD stores.

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Motley Fool contributor Kerry Sun has no position in any of the stocks 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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