The Coles Group Ltd (ASX: COL) share price did not having a fantastic day today. At market close, Coles shares are down a nasty 3.24% to $18.23 a share. That's in stark contrast to the S&P/ASX 200 Index (ASX: XJO), which finished the day up 0.18%, at 7,503 points.
But Coles investors should be used to a dash of underperformance by now. That's because the Coles share price is also trailing the ASX 200 in 2021 so far. While the ASX 200 is up a healthy 12.25% year to date, Coles shares are down 1.46% over the same period.
Over the past year, the story is not much better. Whilst the ASX 200 has put on 21.77% over the past 12 months, Coles shares have gone backwards by 3.19%. In other words, the Coles share price has underperformed the ASX 200 by roughly 25% in the past year. Ouch.
So what gives?
Why have Coles shares underperformed the ASX 200 over the past year?
Like many things in life, some of those numbers are relative.
Part of the reason why the ASX 200 has had such a good 12 months is because of how much it fell during the COVID-induced market crash last year. While the ASX 200 fell by roughly 33% between 21 February 2020 and 20 March 2020, Coles shares actually rose over this same period. We can probably thank the very public panic buying that was going on back then for investors' faith in Coles shares at the time.
So in other words, one of the reasons the ASX 200 has outperformed Coles shares over the past year is that they simply had more headroom to recover in the months following the crash. Since Coles really didn't fall that much, there was less room to rise when the fear left the markets.
But we can't just blame this for Coles' more recent woes.
Half-year earnings disappoint
Another major anchor on Coles shares over the past year was its last earnings report. Not the one that the company delivered earlier this week (which has been quite warmly received). Rather, the half-year report we saw all the way back in February.
Although Coles delivered some healthy numbers at the time, investors seemed really spooked by the company's warnings about the future. Here's what Coles' management said at the time:
Depending on COVID-19, vaccine roll out and efficacy, and other factors, sales in the supermarket sector may moderate significantly or even decline in the second half of FY21 and into FY22. Coles will be cycling elevated sales from COVID-19 in Supermarkets late in the third quarter, for the remainder of the second half, and most of FY22.
This really turned investors off Coles, evidenced by the fact that the Coles share price fell by more than 15% over the subsequent fortnight.
About the Coles share price
But everything is relative. Since bottoming out at $15.28 a share a few weeks after this report was released, Coles is now up almost 20% from those lows. The ASX 200 has 'only' managed to add around 12.4% over the same period.
At the current Coles share price, the grocery giant has a market capitalisation of $24 billion, a price-to-earnings (P/E) ratio of 24.35 and a dividend yield of 3.33%.
