Coles share price slides 5% as inflation hampers FY23 growth outlook

The ASX 200 retailer says it's focusing on ensuring value for customers in today's inflationary environment.

| More on:
A child pulls a very sad crying face sitting in the child seat of a supermarket trolley in a supermarket aisle lined with grocery items.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • Coles share price down 5% in early trade
  • Sales revenue increased 2% from the prior year
  • Final fully franked dividend of 30 cents per share is up 7.1% from FY21

The Coles Group Ltd (ASX: COL) share price is down 4.8%.

Coles shares closed yesterday trading for $19.35 and are currently trading at $17.79.

This comes following the release of the S&P/ASX 200 Index (ASX: XJO) retail giant's full-year results for the 12 months ending 30 June (FY22).

Here's what investors are mulling over this morning.

Coles share price dips despite revenue growth

What else happened during the year?

Coles reported its Smarter Selling program delivered benefits of roughly $230 million over the financial year. The retailer said it was on track to deliver its four-year program of $1 billion of Smarter Selling benefits by the end of the 2023 financial year.

With another year of growth, Coles reported three-year headline sales growth of 12.0% in its Supermarkets segment, with 18.0% growth in Liquor and 8.1% growth in Express.

Capital expenditure in FY22 came out at $1.2 billion. The final fully franked dividend was 30 cents per share, up 7.1% from FY21.

As at 30 June, Coles had net debt of $506 million with net assets of $3.1 billion.

What did management say?

Commenting on the results, Coles CEO Steven Cain said:

We have now delivered the third year of our transformation strategy, including significant growth in our eCommerce operations, coupled with additional efficiencies from our Smarter Selling program. We continue to focus on delivery of our vision to be the most trusted retailer in Australia and grow long-term shareholder value…

The ongoing headwind of rising cost inflation further underscores the importance of our Smarter Selling program. The commissioning commencement of three of our four automated distribution centres and online customer fulfilment centres in 2023 will also allow us to drive future efficiencies while delivering an enhanced offer to inspire customers.

Coles chair James Graham added, "The need for the Group to evaluate and respond quickly to a changing operating environment has never been more important as we focus on ensuring value for customers in an inflationary environment."

What's next?

Looking ahead, the Coles share price could be facing some headwinds after the company said both its Liquor and Supermarket sales growth are expected to be impacted by the cycling of COVID-19 lockdowns in the first half of FY22 and price inflation in the second half of FY22.

The retailer expects Express weekly fuel volumes and sales to benefit from increased mobility, though the size of those benefits depends on fuel costs.

Property earnings in FY23 are forecast to be slightly lower than in FY22.

Coles noted that inflation is impacting its cost base with increasing wages, rent, fuel, supply chain and capital costs, atop lingering impacts from COVID-19.

In FY23, Coles expects to open 20 new stores, close nine stores and renew approximately 40 stores in Supermarkets, and in Liquor.

Capital expenditure is expected to be between $1.2 billion and $1.4 billion, inclusive of its Witron and Ocado projects.

Coles share price snapshot

The Coles share price is up 1% in 2022, handily outperforming the 8% year-to-date loss posted by the ASX 200.

Motley Fool contributor Bernd Struben 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 has positions in 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 Scott Phillips.

More on Earnings Results

Miner looking at a tablet.
Earnings Results

Rio Tinto share price on watch following FY 2023 earnings miss

Rio Tinto's iron ore operations were on form in 2023. It's a shame the rest of the business wasn't.

Read more »

Man with rocket wings which have flames coming out of them.
Earnings Results

4 All Ords ASX dividend shares going gangbusters on results

All Ords investors are sending these ASX dividend shares soaring on the back of their earnings results.

Read more »

Man waiting for his flight and looking at his phone.
Earnings Results

Corporate Travel share price plunges 18% despite tripling net profits

An explosion in earnings is taking a backseat to changes in Corporate Travel Management's full-year forecasts.

Read more »

happy woman throws arms in the air
Bank Shares

NAB shares hit 52-week high on first-quarter earnings beat

NAB appears on track to at least deliver on first-half expectations.

Read more »

A man wearing a shirt, tie and hard hat sits in an office and marks dates in his diary.
Earnings Results

Santos share price slips on 42% profit drop in FY23 result

Profits come back down to Earth in FY23.

Read more »

a man sits on a ridge high above a large city full of high rise buildings as though he is thinking, contemplating the vista below.

Here are 4 ASX 200 REITs results catching the eye on Wednesday

A mixed set of results have been announced by these property companies.

Read more »

Three analysts look at tech options on a wall screen
Earnings Results

WiseTech share price leaps 8% today as revenues surge

ASX 200 investors are bidding up the WiseTech share price today.

Read more »

Two parents and two children happily eat pizza in their kitchen as a top broker predicts a 46% upside for the Domino's share price
Earnings Results

Domino's share price charges higher on improving outlook

Here's how this struggling pizza chain operator performed during the first half.

Read more »