Coles Group Ltd (ASX: COL) shares have enjoyed a strong run over the past year.
In afternoon trade today, shares in the S&P/ASX 200 Index (ASX: XJO) supermarket giant are up 1.2%, changing hands for $21.47 apiece.
That sees Coles stock up an impressive 31.0% since this time last year, racing ahead of the 7.4% gains posted by the ASX 200 over this same period.
And that doesn't include the 69 cents in fully franked dividends that eligible stockholders will have received over the year. If we add those back in, then the accumulated value of Coles shares is up 35.1% in a year. With potential tax benefits from those franking credits.
Of course, those gains and dividends have come and gone now.
The question investors would like an answer to now is, can Coles shares keep marching higher from here?
For some greater insight into that outlook, we defer to the analysts over at Macquarie Group Ltd (ASX: MQG).
Macquarie retains Coles shares at outperform
As you may be aware, Coles shares were in focus yesterday after the company released its third-quarter update.
Among the highlights, the company reported total sales of $10.38 billion for the three months, up 3.4% year on year. The online market saw exceptionally strong growth, with Coles' eCommerce sales up 25.7% to more than $1.1 billion.
Management noted that its Customer Fulfilment Centres (CFCs) completed more than 1.5 million orders over the quarter with a big improvement in online customer satisfaction.
Coles also opened two new supermarkets during the quarter.
In light of these results, Macquarie retained its outperformance rating on Coles shares.
The broker said:
Defensive growth characteristics of Coles remain intact following the update. We remain positive with shareholder returns being driven by earnings momentum, and P/E [price to earnings] broadly in line with long-run average.
Noting that sales momentum continues, Macquarie is also positive with "supply chain initiatives coming to fruition".
According to Macquarie:
At the 1H25 result, management noted a ~$130m tailwind from the conclusion of implementation & dual running costs associated with its DC [Distribution Centre] investment program.
Positively, in the quarter Coles closed its residual manual DCs in NSW. With this tailwind now largely de-risked, we lift our EBIT [earnings before interest and tax] margin forecasts in the Supermarkets business in the medium-term and now forecast a ~15% uplift in FY26E, translating to a similar increase at the group level.
Over the March quarter, Coles completed the ramp-up of its second Automated Distribution Centre in New South Wales.
Commenting on that rollout yesterday, Coles CEO Leah Weckert said:
This period also marked our first quarter where we were able to fully operate both our Automated Distribution Centres and our Customer Fulfilment Centres, underpinning improved efficiency and delivering enhanced product availability.
As for Macquarie's 12-month price target for Coles shares, this stands at $23.10. That's 7.6% above current levels, not including those upcoming dividends.
