Coles Group Ltd (ASX: COL) shares have been discounted recently. As the chart below shows, the ASX consumer staples stock has dropped more than 7% since 20 September 2024.
Brokers, analysts and fund managers are always looking for opportunities that seem undervalued.
While Coles shares haven't experienced a major sell-off, one expert thinks the supermarket company looks very interesting when taking into account its latest sales report.
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Expert recommends Coles shares as a buy
Writing on The Bull, Tony Paterno from Ord Minnett says that Coles shares are a buy.
Paterno said that the supermarket giant recently provided a "solid" update for the first quarter of the 2025 financial year.
The expert from Ord Minnett said the company has demonstrated "strong execution", revealing solid first-quarter sales and "clear cost discipline". Paterno noted that total group sales increased 2.9% year over year to $10.55 billion.
The analyst said that tightly managed capital expenditure "should reward shareholders with healthy free cash flow and dividends".
Paterno also said that beyond the 2025 financial year, Coles has "several earnings drivers" that underpin its confidence in earnings growth. The Ord Minnett expert concluded his thoughts with the following:
In our view, the risk-reward is attractive, with Coles recently trading at a discount to rival Woolworths.
What else did the supermarket business say?
At the same time as telling the market about its sales performance, Coles announced it is investing $880 million to develop a new automated distribution centre in Truganina, Victoria, with the help of WITRON.
Coles considers WITRON to be the world leader in supermarket supply chain automation, with 98 projects across 13 countries.
The supermarket business said it aims to deliver a more efficient, safer, and sustainable supply chain network. Once completed, this new distribution centre could be positive for Coles shares.
The planned Victorian facility will have approximately 15% more capacity than Coles' New South Wales and Queensland automated distribution centres. It is expected to serve all stores in Victoria and Tasmania. It will also integrate into Coles' existing supply chain in South Australia and Western Australia, enabling improved availability in those states.
At the time of the announcement, Coles managing director and CEO Leah Weckert said:
This is another important step in Coles' business transformation as we continue to invest in technology to enhance product availability for our customers and improve efficiency across our supply chain. This new automated distribution centre in Victoria will complement our existing sites in Queensland and New South Wales, enabling us to drive productivity and further capitalise on the advantages of worldleading automation technology.
Coles shares snapshot
Despite the recent decline, the Coles share price has risen around 10% in 2024 to date.
