Supermarkets were once ‘COVID winners’, so why is the Coles (ASX:COL) share price struggling amid Omicron?

Is this why the Coles share price has been suffering lately?

| More on:
SCA share price a child who's been crying with a sad look on his face sits iin the child seat of a supermarket trolley in a supermarket aisle lined with grocery items.

Image source: Getty Images

Key points

  • The Coles share price previously performed well during COVID-19 outbreaks and lockdowns
  • However, the supermarket’s stock has slumped 9% since the emergence of the Omicron variant
  • The dip might be due to the pressures of COVID-19 and the absence of lockdowns

The Coles Group Ltd (ASX: COL) share price has been having a rocky few months lately.

That’s despite a resurgence of COVID-19 cases around Australia. While higher case numbers haven’t necessarily boosted supermarket stocks in the past, the Coles share price generally performed well through lockdowns in 2020 and 2021.

So, why are the supermarket’s shares slipping amid the Omicron outbreak? Let’s take a look.

How did Coles perform during previous outbreaks?

The supermarket giant reported a COVID-19-induced lift in sales for both financial year 2020 and financial year 2021.

The lift was spurred by at home consumption, as lockdowns saw more people sitting at dining tables rather than pubs.

Unsurprisingly, as The Motley Fool Australia has previously reported, the Coles share price was generally buoyed through lockdowns over the previous 2 years.

However, current outbreaks seem to be having the opposite effect.

What might be weighing on the Coles share price in the age of Omicron?

The COVID-19 Omicron variant was first noted in South Africa in late November and quickly spread around the globe.

Since the variant’s emergence, the Coles share price has slumped 9%. There are three notable happenings – aside from Omicron itself – that could correlate to the supermarket’s slump.

The first is the Prime Minister’s resolve to stop locking down in the face of the pandemic.

On 20 December, Prime Minister Scott Morrison told a press conference “we’re not going back to lockdowns”. Morrison stated:

[O]ne of the key messages is, yes, we’re going to need to continue to calibrate how we manage this virus and how we live with this virus in the face of Omicron… we’re not going back to shutting down people’s lives.

Other news that might have put pressure on the Coles share price came from its major competitor, Woolworths Group Ltd (ASX: WOW).

It released an update on the first half of financial year 2022 on 14 December. Within the update, Woolworths CEO Brad Banducci described the period as “one of the most challenging halves we have experienced in recent memory”.

Woolworths’ challenges were brought on by COVID-19’s Delta strain, which impacted the supermarket’s stock flow and caused increased operating costs.

Market watchers might be assuming such impacts haven’t waned amid the Omicron outbreak.

Finally, the Coles share price might be being weighed down by now-routine COVID-19 impacts that have been reintroduced, such as product limits.

Additionally, the ABC reported last week that around 30% to 35% of Coles’ distribution centre’s staff and about 10% of its in-store staff were absent due to COVID.

That’s likely putting pressure on its supply chain and store network.

Should you invest $1,000 in Coles right now?

Before you consider Coles, you'll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Coles wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of January 13th 2022

Motley Fool contributor Brooke Cooper 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 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.

More on Consumer Staples & Discretionary Shares

man at casino throwing chips in the air
Broker Notes

Why the Aristocrat share price is surging again today

The gain comes on top of its 6.7% surge yesterday.

Read more »

Supermarket trolley with groceries going up the stairs with a rising red arrow.
Consumer Staples & Discretionary Shares

Woolworths share price lifts following $218m online marketplace deal

The supermarket giant is gaining alongside the ASX 200 on Friday.

Read more »

Sad person at a supermarket.
Consumer Staples & Discretionary Shares

Why is the Woolworths share price sliding 7% today?

Aussie investors heed Target's inflationary warning...

Read more »

Supermarket trolley with a red arrow pointing downwards, symbolising a falling share price.
Consumer Staples & Discretionary Shares

Here’s why the Coles share price is tumbling 5% today

Could recession talk be impacting the supermarket's stock?

Read more »

wine share price rising represented by two people raising wine glasses
Consumer Staples & Discretionary Shares

Treasury Wine share price beating the sell-off amid ‘made in China’ push

Let's take a closer look.

Read more »

A woman leaps into the air with loads of energy, in a lush green field.
Consumer Staples & Discretionary Shares

Own Woolworths shares? The company’s about to hit a major sustainability milestone

Woolies' South Australian operations are set to switch off from fossil fuels in July thanks to a new partnership.

Read more »

A trader stand looking at a sharemarket graph emblazoned with the words buy and sell
Consumer Staples & Discretionary Shares

Could the Wesfarmers share price have already bottomed?

Could Wesfarmers shares be in the buy zone today?

Read more »

Woman thinking in a supermarket.
Consumer Staples & Discretionary Shares

Why I think Coles is a better ASX dividend share than Woolworths

Are Coles shares a better pick for dividends than Woolworths?

Read more »