Coles Group Ltd (ASX: COL) shares will be heavily scrutinised next week when the supermarket business announces its FY23 result on 22 August 2023.
It's going to tell us how it performed over the 12 months and in the last quarter of FY23.
What the company says about its outlook could also have a noticeable impact on investor confidence surrounding the business.
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What might Coles shares report in FY23?
For a lot of investors, the most important thing is how much profit a business is making, or is expected to make.
The forecast on Commsec suggests Coles could generate earnings per share (EPS) of 81.6 cents. If it's able to achieve that, it would represent growth of 3.5%.
The broker Goldman Sachs, which currently rates Coles as a sell with a target price of $16.70 (implying a decline within 12 months), recently revised down its expectations for profit margins for its food business.
Goldman Sachs noted delays with Coles' online grocery technology partner Ocado. It also gave its view on the increasing importance of data analytics, convenient e-commerce and digitised omnichannel retail, and the supply chain.
However, Goldman Sachs also said it's possible Coles can achieve better than expected market share due to "more value proposition" compared to Woolworths Group Ltd (ASX: WOW). A faster ramp-up of Ocado and automated warehouse technology provider Witron could result in earlier and stronger cost efficiencies.
According to Commsec, Goldman Sachs is forecasting that Coles can generate EPS of 81 cents in FY23, make net profit after tax (NPAT) of $1.085 billion and achieve earnings before interest, tax, depreciation and amortisation (EBITDA) of $3.6 billion.
The last trading update we heard was for the FY23 third quarter where total sales rose 6.5% to $9.7 billion while supermarket sales increased 7% to $8.6 billion.
What about the dividend?
Goldman Sachs' estimate for the annual Coles dividend is 65 cents per share – this would be a grossed-up dividend yield of 5.2% if that's what it achieves.
The forecast on Commsec is slightly higher, at 66 cents per share, which would be a grossed-up dividend yield of 5.25%.
Analyst ratings on Coles shares
While Goldman Sachs may currently be negative on the supermarket business, there are eight analysts that rate it as a buy, four that rate it as a hold, and four that rate it as a sell, according to Commsec.
